Justin swallowed hard as he looked at the price action rise like a bottle rocket. It was truly an awe inspiring site but there was just one problem, he had entered a short on the 5 minute NQ E-mini. It was an impressive intermediate downward trend. The 240 minute supply zone that he had identified appeared really strong. Actually, as he put his plan together the set-up had excited him even more since his odd’s enhancer calculations had landed him in solid territory. It all seemed to be intact, so why was it not working in his favor? Then he spotted it. The 240 minute time frame level was not fresh! It had been hit twice before in the last few months and it became painfully obvious as he investigated the weekly chart. It might not have hurt so much if he hadn’t dropped the ball several times before given this same situation. In other words had he documented this failure in the past and had he dealt with it in order to anticipate its reoccurrence, this may never had happened today. He didn’t use the feedback from the previous trades, so he ended up reliving this bad dream all over again.
Feedback is essential to any knowledge based performance. You must have a way of knowing “how you are doing” with respect to the variables that make up the trading process. Now, there are some traders who would say, “All the feedback I need to know is if I am making money or not.” To this I would reply… if you are not measuring, tracking and documenting your trades you have virtually nothing upon which to base your progress. And, if you are trading by chance, you are putting your money at great risk. Basing your trades solely on profit & loss is an ineffective way to measure your “mastery” of the process. If you don’t know what you did right or wrong, then you can’t duplicate or eradicate the behavior. Without this knowledge, you are trading by chance.
Trading mastery involves a set of variables or items that lead to “skill building.” Skill building is critical to any performance based endeavor because that is the path to getting better. And, the essence of skill building hinges on being self-aware. If you are self-aware then what you do, how you do it, the frequency with which you do it and the order become variables that you are not only able to track, measure and document, but you will be able to manipulate as well.
Firstly, skill building involves a set of trading protocols. A protocol is a sequential order of steps toward an aim or goal. And, protocols can be found across the board having to do with anything that involves performance; like medicine, law, accounting, and sports, to name a few. These trading protocols are made up of strategies, procedures, set-ups and rules. They are talked about, reviewed and evaluated in special classes, for instance Online Trading Academy’s Extended Learning Track where rule based trading is emphasized through strategies and set-ups.
Secondly, protocols must be supported by effective routines. This is where you take the sequentially ordered protocol and develop a routine where you are doing the same thing “over and over.” This approach not only instills the behavior into a set of responses that support the overall goal, but it also trains your system to continue to follow-through when things get difficult. Training is about learning and doing. You’ve heard of the adage “practice makes perfect” well actually practice makes “permanent” in your body/mind system. All world class achievers have trained for years to accomplish their goals.
Thirdly, it is imperative to create a feedback loop in order to verify and document whether or not the protocols are performing adequately. Through measuring, tracking and documenting you will identify not only what needs to be modified or changed with the protocol or strategies and set-ups (the mechanical data); you will also identify what needs to be modified in your thinking and emotions, (the internal data). Of course, feedback can be principally a “self-monitored” process; but, as well it is also extremely effective when you are given critiques from someone else. But, the point is that feedback in any form and from any aspect of your immediate environment should be welcomed and never taken personally. It is only additional information, which can be the lynch pin of your ability to master the process.
After you have used your feedback to judiciously manipulate your mechanical data and as well your internal data and you have instilled the routine deeply, then you have begun the process of habituating the entire sequence. Habits are powerful and you know from your own experience that good habits lead to desired results and bad habits lead to headaches. So the conversation in part is about instilling strong, goal oriented habits that will lead you to what you want…skill building. Also, when you have incorporated a skill into your mind/body system, and in other words you have mastered the process, you have gone from being totally unaware (unconscious incompetence) to working on what you have identified (conscious incompetence) to establishing a routine (conscious competence) to habituating the thinking, feeling and doing (unconscious competence). The beauty of being unconsciously competent is that the behavior becomes the default mechanism (an option that is selected automatically unless an alternative is specified) for following through on what matters most in your trades. Remember when you were learning to drive. It was very scary and difficult. You went from being unconsciously incompetent (you didn’t know what you didn’t know), at 4 or 5 years old; to consciously incompetent (you knew there was a process called driving and at 10 or 11 you were painfully aware that you didn’t know how); to consciously competent (at 15 you were learning and you had to think about every small detail as you drove); to unconsciously competent ( at 30 your skill level had dropped into your subconscious behavior where you could eat a burger, talk on the phone, and drink a cup of coffee simultaneously while driving – of course please do not do that).
So, skill building is the path to attaining, maintaining and sustaining your A-Game. And, you cannot skill build without a feedback process that is aimed to identify what works and what doesn’t, which of course is related to both the mechanical data (all the market, news and indicator driven data) and your internal data (your thoughts, emotions and behavior). You must track, measure and document all significant data (any data that materially affects your trade). If you do this religiously, and use the information to modify your protocols and routines you will habituate this process and you will skill build. Trading in the trenches requires the best that you have to bring to your trading platform. Thousands of traders out there are willing to do what it takes to master the process. You must ask yourself, are you willing to do what it takes? Master your mental game. Ask your Online Trading Academy representative for more information on classes that are designed to help you do just that…skill build. And, get my book, “From Pain to Profit: Secrets of the Peak Performance Trader.”
Dr. Woody Johnson