“Talent is cheaper than table salt. What separates the talented individual from the successful one is a lot of hard work.”
― Stephen King
In the world of sports, talent is a great thing to have. It often sets the tone for an awesome career, but only if you also work hard. You’ll often hear sports announcers commenting on the “athletic ability” or the “talent” of a player. However, in trading as in sports what matters in the long run is the player’s level of skill and their persistence (hard work) that makes all the difference. Additionally, building skill has a formula that is applicable in any endeavor where performance is based on how well you can execute. That formula is P + ER + FL + H = SB. From the medical operating room, to the courtroom, to the stage, to the professional sports playing fields, to the trader’s office the ability to win dependably rests with hard work and building skill with every challenge.
Let’s take a closer look at this formula P + ER + FL + H = SB.
(P) is for Protocol. A protocol is a series of sequentially ordered steps toward an aim or a goal. In trading, these steps would include strategies (for identifying levels, entries, targets, stops and trade exits to name a few). Protocols would also include procedures, set-ups and, of course, your rules.
After the protocols are established, you would add (ER) which stands for Effective Routines. Routines help to bring consistency to your behavior and help to neutralize behavior 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 the goal of actual follow-through in every part of the trade. It is essential to write your routines down and to prioritize them in a checklist. This process helps to ensure that you will remember to employ your routine. Even more importantly, when they are prioritized in a checklist the need to “think” about each item is eliminated which paves the way for improved follow-through. Furthermore, every time a routine item is crossed off the checklist, a sense of accomplishment settles in and you feel better about doing what is in the best interest of your trading. This positive energy then helps to form the “habit” so that this activity drops into automatic control. In other words, doing the right thing is positively reinforced.
Once you have your routines in place, it is crucial to add a Feedback Loop (FL) to the mix. Anytime you take a trade action there is an outcome, a consequence, a result. This constitutes a system of feedback. However, for feedback to be useful you must pay close attention and track the data. Feedback loops allow you to measure, verify and document what is working (positive feedback) because you want to embellish or increase this behavior as in rule follow-through and keeping commitments. By the same token, you want to measure, verify and document what is not working (negative feedback) because you want to decrease these incidents as with rule violations and breaking promises. In this way, you can compare, for example, the anticipated hit rate of your protocols and routines with the actual hit rate and make adjustments. You must measure and keep a scorecard of anything that you want to get good. When you memorialize what you did and how you did it, you can then replicate positive implementation and execution as well as eliminate poor execution.
After the feedback loop is established, you must Habituate (H) this process. In other words, it is critical to repeat and 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.” In one way, you are reducing your psychological resistance to a new process, which is habituation and on the other hand, you are forming new positive and powerful habits as you habituate.
Skill Building is something that you’ll want to maintain across all trading processes. 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 your unconscious drives much of your thinking, you must become aware of your underlying self-sabotaging beliefs that drive thinking, emotions and behavior. Trading is arguably one of the most difficult ventures 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 to develop and nurture a skill building mindset; that is, to ensure that you are focused with a laser precision on what matters most as you aim to follow through and “hit-the-target”.
So, a key element of your trading success is your fierce focus on skill building (SB) in each and every trade. As you move forward, keep a sharp eye honed on 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 in order to track the erratic issues that negatively impact your results. Then do the same thing over, and over again so that you make a strong habit of the method. This is how to develop your highest and best trader. In Mastering the Mental Game, we teach you tools and techniques to support you in skill building. For more information about XLT and on-location classes ask your Online Trading Academy representative. Also, get my book From Pain to Profit: Secrets of the Peak Performance Trader.
Dr. Woody Johnson – firstname.lastname@example.org