Lessons from the Pros

Specialty Skills

Your Confidence Is Best Built Upon Competence

Are you that person? You know, the one who takes a weekend course and thinks that they’re an expert. Or the one that is “too busy” to learn and do what it takes to master a subject or endeavor, like … trading. Well, it’s a common notion and most people across the planet have fallen into this trap from time to time. Let’s look in on Betty and see how she handled this.

Free WorkshopIt looked like it would keep going up; but the price action soon stalled and headed to the downside. It was on the NQ E-mini and Betty had placed a market order as an extended candle on the 30 minute chart had blasted off and continued to go upward. Betty had been trading for several months and believed that the seminar she took had provided enough of an education in the markets to prepare her for live trading. “How hard could it be?” she had said to herself after completing the course. She made a plan and made sure that she had a few rules. Additionally, Betty thought that the brief instruction in trading discipline was more than enough because, as she put it, “I have that part handled.” A number of her friends had made a few ventures into the markets and she commented to herself, “Hadn’t they done well?” It didn’t matter to her that they freely admitted having no plan and they simply “went with the crowd.” Betty was not fazed by that admission and barreled forward with an unbridled confidence that she would prevail. However, this confidence was not based upon a foundation of competence and it was not long before she had a string of losses that shook not only the confidence but, with this latest turn in the price action, left her confused, frustrated, fragmented and frazzled. She couldn’t figure out what was going wrong. This stuff was supposed to be easy…wasn’t that what the seminar had intimated? Unfortunately, Betty not only lost in that NQ trade, she proceeded to lose consistently for several weeks that ended in a blown account. She blamed her failure on the seminar, the market news channels, her friends and anyone or anything else that came to mind…that is, anything else but herself.

The fact is that Betty had not prepared herself for trading success. Yes, she took a course and had studied her material; however, what she failed to realize was that success, in any important and valuable endeavor, requires more than just a few classes. It requires both an educational foundation and a mindset that is supportive to the task at hand…especially trading. Trading, as anyone who has done it for any length of time will come to know, is arguably the single most challenging venture on the planet. The reason for this is simply that trading is the only venture where if you are in a trade, with every tick of the market you are gaining or losing. Money is an extremely powerful stimulant in our society and from the early years of childhood we are taught that capital is directly associated with power and influence. Additionally, money becomes a part of personal identity and people who have it tend to feel a higher self-esteem than those who don’t. Trading requires both mechanical expertise (the ability to analyze and process market order flow, price action, indicators and economic reports while planning and executing according to rule-based strategies) and internal data expertise (the ability to manage thoughts, emotions and behaviors) which are the precursors to getting any result. The internal data or your mindset and attitude are crucial to your ability to see the mechanical data without distortion which often leads to erroneous interpretations and a lack of effective follow-through.

So, Betty had set herself up for failure. Her educational foundations were flimsy and she did not recognize that participating in the markets is almost exclusively mental and emotional as you negotiate mechanical and internal data. Actually, mindset is sacrosanct to any level of consistent trading success. You must hold yourself accountable for all results, focus on skill-building and process mastery as foundational principles; and you must keep your commitments. Without these, any level of genuine success will be almost entirely illusive. This is positioning for success by moving step-by-step in gaining the knowledge and mastering implementation and execution. In other words, you are recognizing that skill-building and process mastery is where true “competence” is developed. Confidence that is not based in competence is only hubris and promotes delusions that defy reality.

One of the definitions of trading is that it is a journey in self-discovery. As you trade in a self-aware state, you will learn more about yourself and become aware of the issues that stem from limiting beliefs about money, the market, and your relationship to them. Having a mindset that holds you accountable for all results means that you are prone to identify improvables early and often; and, as well, you are establishing the first steps to ensuring your position on the pathway to using the information and data in efficient ways. Your success, that is, trading with your best and in the interests of your best depends upon this positioning. This is what we teach in “Mastering the Mental Game” Online and On-location courses. Ask your Online Trading Academy representative for more information; and get my book “From Pain to Profit: Secrets of the Peak Performance Trader.”

May all your trades be green.

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.