For All You Struggling Traders

[speres 10]

This a great article, read and fully understand...

 

Documenting the data of your trading is essential to success. Also, it's of vital importance to track not only the "mechanical" data; i.e., the data of the actual trading execution (entry, targets, stops and exits); but you must track the "internal" data as well; i.e., what you are thinking, emotionally feeling, and the unconscious beliefs that are driving the T + E + B = R equation. In this equation that is involved in "all" of our outcomes, T = thought, E = emotions, B = behavior and R = results. So, you've got to attend to the data of this equation because it is involved with every trading decision that you make.

 

A Thought Journal is designed to reveal destructive and constructive thought patterns. A Trade Journal is designed to reveal your self-destructive behaviors and your positive behaviors. Human beings are impulsively driven by greed and the desire to dominate. They will take the easiest way to get and keep what they want. This often has negative and unintended consequences that are frequently destructive. And humans are not naturally prone to accountability or self-discipline, which is why we need laws, rules, boundaries, and limits in society.

Trading requires self-imposed limits and these limits must be created through personal accountability. You must know what you require in the way of protocols, strategies and rules in order to create effective self-limits or self-control. Documenting actual behavior provides the data to compare to your thinking and to identify strength and weakness - thinking precedes behavior and behavior reflects thinking. When you accurately record the thinking that was present during a trade, it exposes your actual state of mind, not the desired state or the one that we tell ourselves we have already. This confronts illusion about your true skill. Some of the things to look for are:

 

Was my stop/limit hit or did I take myself out?

 

How much time was I in the trade?

 

Then compare your recorded thoughts to your trade plan:

 

Where are the inconsistencies?

 

Where are the congruencies?

 

Is anything different than what I planned or expected?

 

It's very important to identify the weaknesses and the strengths of your execution. After that, new habits and supportive behaviors can be created.

 

It is critically important to identify the faulty patterns of thinking causing the errant behavior. After identifying the bad behavior, isolate it by creating rules to follow. When the rule has been created, use mental techniques and tools like the ones taught in the Extended Learning Track (XLT) - Mastering the Mental Game class to help support effective ways to modify the bad behavior one trade at a time. Thought and emotions are difficult to control. The difficulty stems from the deep-seated and unconscious nature of the programmed patterns that cause the unwanted behavior to begin with. The goal is to get into a mental place to see how the behavior reflected foggy thinking and how thoughts and emotions work together to create results - this knowledge helps to create rules designed to cut losses and position you to re-observe the order flow without the emotional noise.

 

Personality is an amalgam; that is, we have many parts to us that don't always get along. Your personality is formed through the learned achievements and learned limitations that are presented through your MAPs and personal mythology. The "parts," so to speak, are sub-personalities formed through patterning as a response to certain environmental conditions. For instance, you may act differently with your father than with your mother, especially if you didn't grow up with one or the other. It is also likely that you have a different persona at the office than at home. And you may act differently when stressed and under pressure than when you are relaxed and unthreatened.

 

Different parts of you reflect different program patterns. You are not always the same and how you are is based upon what part of you shows up. Also, the environment, biorhythms, discomfort vs. comfort, and recent events that may have shaken your confidence, all have an impact upon who shows up. So, sometimes you are confident and relaxed; sometimes you are agitated and anxious; sometimes you are depressed and fatalistic. Deep-seated MAPs or mental models create these emotions. They result in "who is coming to the trade today" and greatly affect how events are perceived. In other words, do you perceive the reality of the chart? The goal is to get on the right side of the order flow. The order flow is a natural and free flowing phenomena and it is an open-ended system that resonates with itself. The ideal as a trader is to approach the market system in an open and available state, and in balance with yourself and resonating with the organic aspects of the market system. You want to be focused on supporting your effectiveness, and a big part of that is accepting the market reality. It's about becoming one with the organic market forces. This means remaining in a constant state of observation, whether getting in or staying out, or staying in or getting out.

 

When you do something that you enjoy, like riding a bike, you can choose to ride or not ride, and you can ride as long as you want, riding easy or energetically. The laws of centrifugal force remain the same. As long as you pedal, you will continue to ride, and if you stop, the laws still continue. By embracing the market as perpetual motion of an organic system with never-ending unfolding events, in harmony with itself, you are better positioned to approach it with the internal harmony of your highest and best self. The question is, "How close to my A-game, my highest and best self, am I at this moment?" The market is constant (like centrifugal force). You don't need to be concerned with the market. You just need to be fully present, in that moment, and available for it. There is no right, wrong, good, bad, should, must, can't, hope, fear, pain, or other hyperbolic emotional moniker that can rightfully be attributed to the market system. "Things are as they are and I am the way I am. I am always participating. It is what it is and I am what I am."

 

Your Thought Journal and Trade Journal work together to confront weaknesses and consolidate strengths. You create new rules to modify your behavior until you sense you are in the feedback loop of the trade. As you consistently support your effectiveness by building your strengths and consistently minimizing your weaknesses, you become more and more aligned with what the market is - a natural system. Waiting and watching is a form of participation in the market. Becoming symbiotic with this natural system is to watch the price action breathe and move.

With experience, and by increasing your capacity for internal alignment between your parts through journal work, you and the market can become aligned. When this happens, you see the order flow as it is and not as you "wish" it would be. Then you may choose to get in. If you sense you are not aligned, you get out. But whether you are aligned or not, you are always getting in or getting out, depending on the needs you have at that moment.

 

The Feedback Loop of the Thought Journal and Trade Journal process provides a roadmap and blueprint of where you want to go and what you want to build in your trading so you can accurately see and participate in the order flow without being overly influenced by emotional interference. The objective of emotional interference is not to eliminate it. Emotions are an inextricable part of who we are as human beings.

The point is to learn how to understand more about them so they can be contained and managed and seen as an ally to boost the drive to stay on course so behavior and performance are not adversely affected. As you modify both cause and effect, you know where that modification is leading. By knowing your strengths and weaknesses as a trader, knowing the state you want to achieve, and knowing you are on the path to getting there, you close the gap between you and the market. Your natural ability to perform and the market's natural ability to perform, are better aligned, and the correct action to take next is self-evident. Get in, stay in or get out, stay out.

 

So, always have your journals at the ready. Remember, you can't change what you can't face, and you can't face what you don't know. Document, record, measure and track your market participation. Learn to bring your A-game to your platform and keep your A-game while in the trade. This is just one of the concepts that are taught in the Mastering the Mental Game course and the coaching XLT. Ask your Education Counselor for more information

 

http://www.fxstreet.com/education/market-psychology/lessons-from-the-pros-specialty-skills/2010-03-02.html