Lessons from the Pros

Specialty Skills

Skill Building: A Key Element in Trading Success

Herb is a Futures Index day trader.  He has been actively trading for several years.  His profits are erratic and undependable, often going dramatically up and down in the same session.  When Herb is making money his confidence soars and he feels like a power trader.  On the other hand, when he loses money, which is more times than he cares to admit, he feels like a failure, a loser and stupid.  Herb has wondered for some time why he can’t be consistently successful, and why his drawdowns tend to be much larger than his profits.  He wonders this even though he has no Trade Plan, doesn’t consistently document his trades and despite having numerous rules, tends to violate them regularly.  Herb has no clue and wonders why he can’t get different results even though he continues to do the same thing. Herb is out of control and unless he changes he is headed for a financial ice-cold shower.  Are you Herb?

Among the first things that you must accept in becoming consistently successful is the notion of continuously focusing on your “skill building.”  Actually, in any performance oriented endeavor there is an equation that directly speaks to how to skill build.  This equation is P + ER + FL + H = Skill Building.  The P is for protocols, which is a series of sequentially ordered steps toward an aim or a goal.  Protocols are in all disciplines and professions; such as medicine, law, accounting, the military, academia, etc.  When participating in the markets, protocols include strategies, set-ups, rules and procedures for preparing, analyzing, processing and executing a trade.

When a protocol has been identified, you must add to that Effective Routines (the ER).  Routines help to bring consistency to your behavior and help to neutralize it as a variable in your trading.  Inconsistent or erratic behavior is difficult to manage and leads directly to doing something that is not in the interests of your highest and best trader.  The “effective” aspect of routines means that you are choosing your routines deliberately in order to ensure that you are moving closer to your goal of real follow-through.

Once you have your routines in place it is crucial to add a Feedback Loop to the mix.  Feedback loops allow you to measure, verify and document what is working and “not working” with regard to your protocols.  Anything that you want to get good at, you must measure and keep a scorecard so that your performance has been documented.  When you memorialize what you did and how you did it, you can then replicate positive implementation and execution and as well you will have the information to eliminate poor execution.  You can modify the protocols and routines once you identify what is not providing the expected win rates.

After the feedback loop has been established, you must Habituate (H) this process.  In other words, it is critical to train yourself in this procedure in order to assimilate it into your core.  When you habituate using strategies in consistent ways and writing down what happened you are actually creating a new “program” in your brain/mind that will become a deliberately designed default pattern which is a new “skill.”

Skill Building is something that you’ll want to do “all the time.”  This is how you grow as a trader; that is, by creating consistency in your thinking, preparation, planning, implementation, and execution you will build capacity for strength and endurance in the trade.  This also relates to “changing” bad habits, patterns and faulty programming.  If you want to change your bad behavior, you must first change your thinking and since much of your thinking is driven by your unconscious, you must become aware of your underlying self-sabotaging beliefs that drive thinking, emotions and behavior.  Trading is arguably the most difficult venture on the planet; why?  Because we are talking about money, and with every tick while in a trade you are either gaining or losing money. This is one of the most compelling reasons why you’ll want to develop and nurture a skill building mindset to ensure that you are focused with a laser precision on what matters most as you aim to follow through and “hit-the-target.”

The fact of the matter is that when you go to the market you invariably are expressing yourself; whether you want to, try to or feel a need to, it doesn’t matter, you are and will express yourself.  And, when expressing yourself your behavior is tied much of the time to unconscious beliefs.  Actually, when you are in the markets, every blemish, weakness and character flaw in your personality will be challenged, called out and tested.  Now, that doesn’t mean that the markets are doing that to you.  On the contrary, the markets have no intention for you; there are no rewards, punishments, pain or risk in the markets, only consequences.  You provide all the rest.  And, with changing yourself, you must consistently focus on skill building as you provide the risk when you enter the trade.

You can’t change what you can’t face and you can’t face what you don’t know.  Awareness is fundamental to skill building.  The more aware you are of your underlying self-sabotaging beliefs the more you can position yourself to begin to address these issues – one at a time as you go through the skill building equation.  Now, you might be asking; how do I do that?  How do I become more aware if these limiting beliefs are unconscious?  Good question!  You become aware by simply asking questions of yourself, and by introspection and more importantly by personal observation as you are going through market observation.  When you are in the feedback loop or documenting your trades you are checking yourself and checking the market.  You’ll begin to gain an awareness of what your issues are in order to address them one at a time.  You will come to grips as to why you are continuing to do things that you say you must stop doing; and why you are failing to do those very things that you say you must do.  Once you identify the underlying self-sabotaging data through your documentation, you can begin to deal with them.

So, a key element of your trading success is your fierce focus on skill building in each and every trade.  As you move forward keep a sharp eye honed to your strategies, rules, set-ups and procedures.  Make sure that you are refining your behaviors so that you bring the consistency that you need in the trader trenches.  Document your process so that you track the erratic issues that are negatively impacting upon your results.  Then do the same thing over and over again so that you make a strong habit of the process.  This is how you develop your A-Game, your highest and best trader.  In Mastering the Mental Game we teach you tools and techniques to support you in skill building.  Remember, you can’t change what you can’t face, and you can’t face what you don’t know.  For more information on Mastering the Mental Game XLT and On-location classes ask your Online Trading Academy Educational Counselor.  Also, my book “From Pain to Profit: Secrets of the Peak Performance Trader” is available on Amazon.

Joyful Trading,

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.