Lessons from the Pros

Specialty Skills

To Trade Effectively You Must Be Aware

Have you ever taken a trade and after the trade closed it was as if someone had control of your mouse?  In other words, you realized that the illusion that you just traded seemed real, but it wasn’t, and you were trading without clarity.  You were not aware.  The importance of remaining aware can’t be overstated.  Every day, millions of traders get caught in a “negative trader trance.”  This is when you have ended your trading session and look over the results only to see carnage; rules violations, broken commitments and invariably lots of losses.  But, while the trades were taking place you lurched forward with your head down even though part of you knew that you were violating rules.  You were out of control.  When these events happen, and most if not all novices have experienced or will experience them, you must get back into the Now, back into the present moment and increase your awareness of not only what you have done – are doing – but as well what you can do to refocus your intentions and reestablish your bearings in order to get the results that you want.  Consider this:   

Maxine could feel the anxiety build as though it were a pot about to boil over.  She looked at the NQ E-mini chart with a mixture of dread and depression.  An upward intermediate trend on the daily chart had taken place, which was continuing on the intraday 60 minute in a rally, base, drop configuration.  She had identified a demand zone and was looking for the price action to pull back into that zone.  She placed a stop just below the lower line of the DZ.  Her limit order was filled on the 5 minute chart and she had been in the trade for just a few minutes when the price action turned and was heading back into the zone – right for her stop.  The dread she felt was prompted by the proximity of the price action to taking her out and the depression came from thoughts about the 3 losses she had already experienced.  Maxine was way outside of her comfort zone.  The anxiety was still rising and as well the dread and depression as all were fueled by the internal running commentary regarding what she perceived as her failures; not-to-mention the fact that she was about to lose…again.  She wanted desperately to relieve the tension created by what she was telling herself about what all this “meant” regarding her trading abilities.  Just then she placed her hand on the mouse getting ready to move her stop.  She came perilously close to doing just that when she had a “moment of awareness.”  She had learned the phrase “Remember Ma” which triggered her to pause, take a deep breath and ask herself several questions in order to bring her back into the Now of the trade so that she could focus on what mattered most; i.e., trading her plan and following her rules.

This type of scenario plays itself out over and over each trading day across the planet.  There are traders who have good market knowledge, a good plan, and good money management but fail to keep their commitments and follow-through with the plan.  They become so uncomfortable with flaring emotions like fear, anger, anxiety, greed, and self-doubt, to name a few; that traders inadvertently and often unconsciously do something that turns out to be a rule violation.  That rule violation, whether, chasing, doubling down on losers or moving a stop etc., is a relief seeking behavior and becomes the precursor to a bad pattern or has already turned into a bad habit.  This is when it is critically important to activate a “moment of awareness” as Maxine did.  It can mean the difference between maintaining your cool with keeping your plan and the disaster of throwing it all out the window – which is exactly what you’ll incur if you violate your plan and rules.  The key is to aim to remain in the moment, for the moment, fully available and fully present at all times.  Granted, that is difficult, especially if you are new to the concept.  Actually, you can practice at any time; the trick is getting yourself to practice it when you need it most – at those times in the trade when emotions are starting to storm.  What you can do is use “Remember Ma,” a little mnemonic that can help you by triggering the exercise of pausing and asking yourself:trading mnemonic

1.       What is happening right now?

a.      What am I doing?

b.      What am I feeling?

c.      What am I thinking?

Then ask a second primary question:

2.       What do I want right now?

In other words, ask yourself what results are you really trying to achieve?  Often just the act of asking the question will prompt you to redirect your behavior from being driven by an unconscious pattern to being results oriented.  This can lead to a third question:

3.      What am I doing right now to prevent me from getting the results I truly want?

Then you can make a choice, all you need to do is say the phrase to yourself, “I choose…” and insert at the end what you want to be the focus of that choice.

4.       At that point, take a deep breath and move toward the result that you want by selecting a behavior that represents your A-Game.

This exercise (Remember Ma) involves changing the focus of your attention so that it is on the intention of the A-Game.  The intention of your A-Game is clear; it is to master the process of trading as a rule based, plan following trader at all times.  Unfortunately, so many traders are trading and going through life by default.  This means that they are operating and behaving based upon old programs that are out of their awareness; i.e., in their unconscious.  These programmed patterns of thinking, feeling and doing are motivated by limiting and irrational beliefs (also mostly unconscious) about their self-worth, intelligence, ability, etc..  So, when you are pushed outside of your comfort zone by your own unconscious thoughts and emotions based on the meaning you attribute to what you see, then you begin to reach for the temporary relief…chasing, doubling down, moving stops, etc..  This is when you most want to use “Remember Ma” in order to interrupt the bad pattern and get into the Now of the trade so that you can resonate with reality and what matters most in the trade.  This and other tools, techniques and concepts are what we teach in the Online Trading Academy “Mastering the Mental Game” Online and On-location course.  You must trade with your best when you are in the markets; nothing less will provide you with consistent winning results (where winning is defined as planning your trades, trading your plan and following all of your rules religiously).  Your mental game is critical.  Trading is a 90-95% mental game.  Your performance is not based on anything physical; it is mental hence mental and emotional tools are required.  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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