Experts suggest that 80% of your trading outcomes can be attributed to your behavioural and psychological interactions with the market. It is your mindset that determines how well you comply with good trading, even if you are sufficiently disciplined to adhere to a written trading plan, have the motivation to even write such a plan in the first place, commit to measuring your trading as logic would suggest is prudent, and do the “tough yards” in learning how to trade. Let’s get real...
Compared to the relative ease of learning a new indicator or grabbing someone else’s system to trade, this is hard for many, and falling short in this aspect of your trading (which many traders do) may ultimately be the reason why the majority of traders appear to be less than happy with their results. However REAL practical advice is often relatively scarce. One need only look at how the internet is brimming with advice on which indictors to use for entry, with only scant reference to the behavioural aspects of trading, usually summed up in a trite statement along the lines of “you must be a disciplined trader”.
This article aims to address some of these practical issues through providing 10 possible tactics that may help. Your ten tactics: 1. Awareness and acceptance is critical.
Unless you accept where you are now with your thinking, feeling and consequent behaviour, you will not move forward. 2. You have a complete trading plan that articulates trading actions before you enter and once in trades i.e. an exit strategy. The ambiguity of many trading plan statements, although better than not having a plan at all of course, does not serve in creating consistency in action in the “heat of the market”, leaving the trader more open to straying from that which was original planned. 3.
Start a journal. Sometimes the very process of formally recording what you are doing helps in doing the right thing more consistently. Of course, a journal will enable you to identify what you are REALLY doing and what contributed to decision making, is crucial to be able to pick up common threads that can be identified easily ad subsequently worked upon. 4.
Press the “reset button” on your trading account NOW. What we mean by this is an acceptance that your trading capital is what it is now. There is little point and it does not serve a positive, committed mindset if you are “stuck” in what has gone before.
If you have been on the receiving end of ‘donating’’ a proportion of your capital to the market through ill-discipline. Take your previous results as feedback, use it as the motivation to act on what has been happening. This is VITAL! 5.
Re-align with your trading purpose and plan prior to every trading session. Reminding yourself of what you MUST do and why you are doing it should be part of your daily trading ritual. 6. Make it a mission to “challenge” your existing plan on at least a 3-monthly basis through gathering an increased weight of evidence that its component parts are working for you as an individual trader.
This breeds confidence in actioning a plan, enabling more disciplined trading. 7. Beware ‘unhealthy’ statements, both externally that you may hear flying around the investment world, and the internal language that “pops up” in your head whilst trading (although this can give you clues about what is happening with you). For example, “do not invest with money you can’t afford to lose” (it makes no sense to go in to the trading arena with a mindset that it is ok if I lose my capital), or even worse, “it is not a loss until you take it”. 8.
Take regular breaks from the market during any session, particularly when trading shorter timeframes, to re-align with purpose and plan, and to mentally press your “reset button”. Remember, research suggests you are your optimum concentration level (without changing an activity) for around 20 minutes. Use “gaps” in active trading to do other things perhaps e.g. make a journal note, get your “books” up to date or even re-align with an article that has previously made a difference.
These are potentially far more fruitful than purposeless screen watching, simply observing positions move up and down. Additionally, of course, this change in activity could be helpful in maintaining concentration when you re-check in with your positions. 9. Ensure that you are trading within your level of competence i.e.
Trade ONLY what you have learned, you are more likely to revert to unhealthy actions if your confidence is low relating to what you are doing. 10. Trade smaller positions until you have evidence of developing good consistent habits that break away from your current less healthy trading state. There are a few different ways to action this, reducing your tolerable risk level significantly per trade e.g. from 3% to 1% of trading account capital, or trading micro-lots rather than mini-lots are a couple of examples.
Look down the list above and choose 2-3 that resonate with you to focus on in the first instance. Master these and then move onto the rest with the confidence that achieving a developmental goal often provides. Finally, as we have discussed before, be gentle on yourself.
There is no point in beating yourself up emotional for mistakes you may have made in the past as this is unlikely to contribute to taking some positive steps forward. There is NO successful trader we have come across that does not subscribe to continuous learning, including in this context of course, the learning you must do about yourself as a trader.
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