ETF Prophet

“History’s great achievers – a Napoleon, a da Vinci, a Mozart – have always managed themselves. That, in large measure, is what makes them great achievers.” – Peter Drucker

In Part 1 of this series we looked at having Structure as an essential element to our trading success. Successful businesses have a defined and comprehensive Structure and accountability in place.

In Part 2 of this series I discussed Integrity and whether we are “in integrity” or “out of integrity”. Do we say what we mean and mean what we say in the Trading Structure we have created? To the degree that we are “out of integrity” our trading will suffer. We all have strengths and weaknesses and in the next few posts I will primarily address weaknesses that compromise our ability to achieve a successful trading career.

Throughout his prolific writing career, Dr. Brett Steenbarger often emphasized the necessity of identifying one’s strengths in order to have trade successfully. In addition to the identification of strengths, he also suggested doing more of what we are already doing well. While I am in agreement with Dr.Steenbarger, we must also learn skills and techniques that challenge our weaknesses, automatic patterns, thoughts and feelings that negatively effect our trading. From my experience, if we don’t minimize some of the more serious breakdowns we create the possibility of blowing out our accounts.

When I use the term “serious breakdowns” I’m referring to such trading mistakes as: doubling and tripling down when we are in a losing position; trading because we’re bored; random trades with no premise, edge, entries or exit strategies; impatience; holding losing positions “hoping” they will turn around; lack of discipline; playing not to lose after a big loss, etc….

Maintain a Trading Log

I recommend that you take some time and write down every area in your trading that is keeping you from being successful (where you are “out of integrity”). Writing it down frees you up and allows you to focus your attention on what is most important. If you have problems identifying areas of weaknesses, look at your rules, agreements, and the Structure you have created and see where you are managing yourself well and where you are not. Look at the goals you intended to achieve (these would be part of your Structure) that aren’t happening. Next, rearrange this list in order of priorities.

For example, what do you need to tackle first, and then second, etc… What we’re working with are your behaviors and actions that do not serve you as a trader. I need to be clear on one other aspect: this is not therapy and this is not the place to address one’s personal psychological disorders that may be contributing to lack of success with trading. For those issues, you may consider meeting with a specialist in clinical/counseling psychology or psychiatry.

Let’s now take a look at one strategy/technique (we’ll work with one per week) that will assist you in accomplishing your goals and minimizing your weaknesses/breakdowns. This will require preparation, work, organization, practice and hopefully be fun.

“Playing” to Your Weaknesses

First of all, trading is counterintuitive. What I’m asking you to do is counterintuitive and is a creative process that requires imagination. Change can begin when we stop trying to be something we aren’t. For example, if one of your weaknesses is impatience, sometime during the trading day (when the markets slow down) I want you to be intentionally impatient for at least 15-30 minutes or longer. Make sure you do it in simulation mode (not live trading). In a very real sense you have to be who you are first (acceptance of your impatience) before you can make the change to patience or at least minimize your impatience.

So much of our time is spent “trying” to solve our problems with commonsense approaches which provide no lasting change. Change happens when we give up, at least for a few minutes a day what we would like to be and be what we already are. The basic point of view is before we can make the changes (our ideal self—being patient) we want we need to intentionally be what we really are.

For instance, in the example above we actually want to make the condition “impatience” real and totally get into it. Be what you are already are but with conscious intention. Act it out to the max. Feel it, say it, trade like impatience is the most perfect way to be and trade. You might say something like this: “What the heck is going on with this market. It’s not doing what I know it should be doing so I’ll jump in and get ahead of all the suckers. Patience is a losing game and I’m going to let the market know who’s the boss and will move quickly to prove my point. I’m a very busy person with multiple obligations, therefore, time is of the essence and patience is a sucker’s game.”

Trade accordingly (in simulation mode) and let it fly! Your time being intentionally impatient (or whatever weakness you begin with) must be truly intense in order for the problem to start losing control of your behavior. Do this for a week or two — record the sim results and see what happens!

I would love to hear from you with questions, your experience with the above technique and other ideas you would like me to pursue in this series.