Lessons from the Pros

Specialty Skills

The Keys to the Trading Kingdom

The opening bell would soon be signaling the beginning of the US markets trading day. It was still early on the west coast and the sun was kissing the horizon as Jim looked over the NQ E-mini globex chart where he had drawn his levels as he prepared his plan to short at the fresh supply zone on the 60 minute time frame. His plan included a limit order to sell at the price point in the middle of the SZ on the 5 minute chart with an automatic stop-loss to be placed just above the distal point of the zone. The bracketed order also included his 1st target (which was a 3:1 reward/risk ratio) to take off half of his position and let the rest run with a trailing stop. As he completed his plan, he took a deep breath and “pulled his earlobe” (a behavior that he had linked to a powerful and confident memory) so as to shift his internal state, grounding and centering himself in order to focus his mind and visualize the outcome that he wanted. This visualization was not so much geared to profit as it was seeing himself doing everything that was necessary to trade his plan, follow his rules and keep all of his commitments so he would maintain his highest and best trader (his A-Game). Jim believed in both his trading strategy as it was triggered by the set-up and as well he believed in his ability to engage a mindset that kept his highest and best interests in focus. He also acknowledged that his positive beliefs had to be nurtured and supported because he still harbored a range of limiting beliefs that from time-to-time sabotaged his trading efforts. He did this by using a metaphor to help him maintain a power perspective; that is, he saw himself as a hungry lion that identified the high-probability prey (trade) waited patiently and stalked for just the right time to execute the pursuit. Additionally, he used a number of other mental/emotional tools to ensure that his internal data had as much leverage and edge for a fierce focus on what-mattered-most. In this way Jim was “managing his emotional state” so that his attitude had just the right amount of altitude to achieve his results.

>key to the trading kingdom

In the above, Jim was using the 4 keys to the trading kingdom. These keys are the necessary ingredients to achieving anything of value. They are major components to getting the trading results you want. Let’s list them briefly:

1. Visualization

Goals are extremely important as you begin trading, and goals are designed to help you objectify and prioritize your steps to become a consistently successful trader. However, the precursor to setting those goals is to “see” your destination specifically and clearly. This vision is an outgrowth of the “why” you are trading in the first place… your purpose. It ties the what-matters-most in your life to the what-matters-most in the trade. This is where your passion is put in the service of propelling you toward that destination. Jim began his trading session by imagining himself doing exactly what was necessary to maintain his A-Game at the platform (trading his plan, following all of his rules and keeping all of his commitments).

2. Belief

The next key is to have your beliefs in alignment with your vision. You’ve got to believe in your ability to learn, to be curious, to maintain a course of action and to generally believe in yourself. Now, this doesn’t mean that there are no challenges. On the contrary, as with Jim, you’ll want to uncover any limiting beliefs lurking just below the surface and neutralize and extricate them. In the same vein, nurture your positive beliefs by being self-aware and monitoring your thoughts in order to dispel any negative “out-of-alignment” thinking and turn that thinking around. Of course, you’ll want to have confidence (belief) in the trading set-ups, procedures and rules of your system, just as Jim did. This is supported through back-testing and using feedback (documentation) so that you are measuring and verifying that your set-ups, procedures and rules are working for you.

3. A Strategy for Actualizing the Vision

A strategy is a plan of action or policy designed to achieve a major or overall aim. When you do anything (good or bad) you are using a strategy. Many traders fall into bad patterns and habits that stem from negative programing in their past. They are caught in strategies that don’t work; and they use them over and over expecting a different result. What is crucial is to develop your strategy for making that vision a reality. This goes for your internal data (thoughts, emotions and behaviors) as much as it does for your mechanical data (everything that has to do with the mechanics of the trade – charting, news, planning, execution, exiting, etc.) You’ll want to create a strategy for how you will prepare and engage a mindset with an attitude that has altitude; meaning that you employ mental/emotional tools – as Jim did with his centering and grounding device – to ensure that you remain on target, on task and on purpose in your follow-through.

4. Managing your state

An internal state is a condition of thinking and emotions. It is a mindset that encompasses beliefs, internal pictures, biases and memories. For instance, consider the emotion anxiety. It stems from thoughts that are anxiety producing such as watching the price action inch towards your stop-loss. However, the state of anxiety would also include memories of times that you were taken out of a trade and left behind to watch it hit what would have been your target, along with the sounds, feelings, and sights of that memory. Internal states are what govern your days and your trading. It is critical to “manage” your internal states using the internal data strategy that was mentioned in the above.

There you have it. Your trading is serious and you’ll want to give yourself every edge. When you are in the trader trenches it is imperative that you bring and maintain your A-Game at your platform. Your best is the only thing that will create the conditions for consistent positive results. Let’s face it, results is the name of the game. This is what we teach in “Mastering the Mental Game” Online, XLT and On-location courses. Ask your Online Trading Academy representative for more information. Also, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.

Happy Trading,

Dr. Woody Johnson

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.

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