Lessons from the Pros

Specialty Skills

Where Are You Placing Your Attention In The Trade?

Attention is a critical part of your ability to follow through.  In other words are you consumed by all that happened in the last month, day, or hour; kvetching over all the mistakes and allowing those thoughts to distract you mentally and/or emotionally?  Or, are you anxious and fearful of what “could” happen in the ensuing hours, days or months in your trades and again finding yourself taking your eyes off the proverbial ball.  What is emphatically crucial is that you place your attention firmly on what you are doing in this moment of your trade.  Attention is a precious and finite commodity.  You only have 100% of it at any given point in time.  If you are immersed in yester-moment or caught up in what might transpire you are reducing the amount of attention that you have available for remaining on the trading task at hand.  Let’s face it, when you are in the trader trenches you need ALL of your mental/emotional resources to identify and execute the “right” and “appropriate” decisions.  It’s hard enough when you are paying full attention and so much more challenging when distorted judgment and distracted thinking causes your focus to stray from what matters most.  For example, let’s take a look at Derwin.

Derwin looked at the candle on the daily chart.  It was yesterday’s candle and it was red just like several before it; and it looked good.  You see, it represented a pull-back from a high several days ago on the YM E-mini.  The high was the latest in several higher highs and higher lows that stretched back a few months representing a strong upward trend.  What looked attractive to him was the fact that the price action had bounced off a 10 period and a 15 period exponential moving average several times, and as well the highs pulled back off significant supply levels several times.  On this day, the price action’s pullback was hitting a significant demand zone that also happened to be coinciding with an upward crossover of the 2 moving averages at the open.  For Derwin this was an important set-up that he had been waiting for.  Derwin was an experienced trader and he appreciated that his overarching trade plan was essential; he also had a plan for this trade as well…that was his method.  There was however a fly in the ointment…he began to think about the last time he played this set-up where the price action had moved in a similar fashion and was overtaken by the very painful memory of having lost in the trade when his stop was hit.  This loss was particularly painful because it represented a significant drawdown.  In fact, he became so engrossed in this memory that his thinking became fragmented and rather than following his plan, he eventually moved his stop, several times.

He was frantic and fully frazzled by the events that unfolded in front of him.  When the pain became so acute that it wrestled him from that trance he was in, he finally liquidated his position; but not before he had lost 20% of his portfolio!  Now, this story begs the questions:  Was this catastrophic loss due to a lack of knowledge?  No, it wasn’t, Derwin had experience and knew what he was doing.  Was the loss due to something that couldn’t be managed?  No, with training and the use of emotional tools he could have managed his situation and taken the small loss early on.  And, lastly, if he had followed his rules could he have avoided this disaster?  Yes, most definitely.  Derwin had found himself in a negative trader trance stimulated by fear and greed, and driven by subconscious beliefs and thoughts.

Episodes like Derwin’s can and do happen all too often.  In fact, for some it is a daily occurrence.  The point is to remain in a state of self-awareness and to be in the moment for the moment, fully available, fully present and in the NOW of the trade with 100% of your attention engaged.  In this way you will be able to align yourself physically, mentally and emotionally so that your entire system is working in the same direction and on the same goals.  When you are aligned you can access and activate internal resources like the ability to remain focused with intention and attention on what matters most; and the ability to see both the big picture and the details with emotional tools at your disposal in the service of your “A” Game.  When you do this you can resonate with the reality of the charts and the markets without succumbing to internal bias.  You can develop a “positive trader trance” in order to be proactive in trading what you see and you’ll be less prone to being seduced by illusions brought on by what you’re making up about the market, the news or the charts.

Now, being fully available, in the moment for the moment, fully present and in the now takes practice.  The tendency for most people is to focus on the past or the future in a negatively obsessive rumination about past injustices and losses; or future angst-ridden doom and gloom visions of how things will turn out badly.  Your mind is always turned on and you must break the spell of the ego which makes you a slave of your rampant, unceasing, monkey-mind that is full of underlying subconscious limiting beliefs, negative thoughts, and painful emotions.  Breaking the spell of the ego means in part that you must identify the gaps between the thoughts where you can return to just being and without judgment notice and become aware.  The practice is necessary because it’s quite difficult to wrest yourself free of the barrage of thoughts and to allow yourself to focus on exactly what you are doing in “this” moment only; to find joy in being on purpose and on task with even the most seemingly mundane chores.  Make a game of it and you’ll find that it becomes easier and easier to focus in the moment and bring yourself closer to a “flow” experience.  The flow experience was coined by psychologist Mihaly Csikszentmihalyi in his book “Flow: The Psychology of Optimal Experience.”  In it he outlines his theory that people are most happy when they are in a state of flow or concentration, complete absorption with the activity and situation at hand.  Flow is identical to the feeling of being in the zone.  It is being completely involved in an activity for its own sake; the ego falls away and time flies.  Your whole being is involved and you’re using your skills to the utmost.

There are several tools that can help with being in the now and in the flow state.  We teach many of them in Mastering the Mental Game.  These are tools that can support a positive trader trance where you’re apt to develop a magnificent obsession with doing only what is in the best interest of your “A” Game and highest and best trader.  For more information ask your Online Trading Academy representative.  Additionally, my book “From Pain to Profit: Secrets of the Peak Performance Trader” is available on Amazon.

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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