Creating A Better Trader
Traders of all experiences, skill, and success levels have arrived where they are by planning, experience, and often even by happenstance. Many continue working on the first few techniques they were exposed to without much deviation. This can be good for some, but it is often a short-lived situation, and general and specific improvement is a must to succeed over the long haul.
As we are trading and investing, the environment and conditions are constantly in flux. This includes the markets’ conditions, but most importantly the personal situations, personal stages, and priority changes that we all go through in our lives. Care must be allowed for “us to be us” when working in the financial markets. We need to be free to change in a planned fashion; which is the most effective way to change.
For these reasons, and to achieve lasting and consistent results over time, constant improvement, flexibility, adjustments, and growth are a necessity. This article is intended to help you think about a way you may plan and execute that change and make it part of what you are always doing.
First, a little about how we decide when and what to focus our efforts on to improve.
I would like to focus on a technique I will call START-STOP-CONTINUE. It is relatively easy to understand and has been very successful in my personal management. I trust it will provide a perspective you may use quickly.
There are three Major things you can do regarding what you must do. They are:
- STOP – We all know there are things we need to stop doing regarding our trading and investing, but it is difficult to do so. These will sprout up constantly as trading is a mind game at times that uncovers behaviors you didn’t know you had. (You likely could brainstorm your own list and come up with dozens in a few minutes. Suggestion: Do exactly this: Maintain a list of issues and desires and maintain that list forever. As things are completed, leave them on the list for safe keeping.)
- START – We also know there are things we wish we would or could make the time to work on, get them off the back burner, and focus on. (We’ll get back to this one later)
- CONTINUE – No matter who you are, there are things you do well, and aspects of your personality that bode well for trading. There are trading techniques you do well, that provide you comfort. There are aspects of your work life that give you great confidence and joy. You may not know 100% what they are, but they are there. As you move through your trading and investing life, it should become evident of what type of person and trader you are, and what makes you not only happy, but most importantly, what makes you most comfortable.
Preparation for change (new or ongoing):
You should (if you haven’t already) understand yourself and what you are good at. Make your trading plan and alter your trading plan with these things in the front of your mind. Then, and ongoing, make sure you filter all decisions you make regarding what you should do and how you should do it keeping these aspects in mind. Also, if you have trading experience already, partition off the things you do well and enjoy as the primary activities in your trading plan.
STOP the things that hurt your finances, your psychology, your emotions, your account balances, and your overall attitude. Your growing experience will highlight these things for you. Recognize them and write them down in a list to be maintained…forever. Once you have acknowledged these things, you can address them.
Of course, simply just stopping something that is defined as bad for you is not the simplest of things (ie. Smoking, Drinking, Eating, social media, Fearing, Gambling, etc.). However, as the adage says: 80% of fixing the problem is recognizing it. Acknowledge them and track them. You also may find that focusing on the other two categories may make many of these issues fade into oblivion.
CONTINUE is all about your core skills and personality being cherished and leveraged. It is very important to find, test, and confirm some things you do well and consistently. Keep them in your mind in harder times and CONTINUE to perform them to the best of your ability. Trading and investing can have some bad times, so it is always good to have something within yourself that is natural to fall back on. This is your greatest power as a trader.
Finally, the START. You have limited time and resources. You must make time for the things you feel have higher value (or reward) for you. Maintain a wish list of things you want to get to. Prioritize them and keep them front and center. Again – this is a permanent list. Some things can be done quickly, and some will have more planning and stages to them. All things on your wish (to get done) list are important. The below will help you organize and prioritize your issues and actions according to what has proven valuable in the past for others.
As you focus on your pro-active START and CONTINUE activities, you will naturally find that the items you must STOP require less attention. Nice trick huh?
How to determine what we might (or should) stop-start-continue?
After extensive analysis (not to be shown here), the important solutions that traders should focus on fall into five major categories that need to be worked on to be most effective:
- Technical Skills (This is a CORE skill):
These include but are not limited to: computer, network, trading software, spreadsheet and other software supportive of your trading. These also include the use of your trading tools for entering, stopping, and targeting.
- Maturity/Psychological (This is a CORE skill):
These skills are the most difficult. They include: patience, responding to different things, planning, money management, following a plan, creating a plan, testing, distraction management, and being pro-active in your skills development.
- Strategies (This is a CORE skill):
These skills include identifying, choosing, testing, executing, and prioritizing specific trading strategies. They are simply the execution of the trading plan via different approaches. Many people use many different strategies based on their own situation and plans and expectations.
- Trust (Changing the way we think) :
Learned through experience but begin with the things you have heard from others. Some have trouble trusting the market, their strategies, the news, themselves, the strategies, and many other aspects of the financial environment. It is a personal issue that must be addressed to allow oneself to consistently execute trades and a trade plan. (NOTE: As experience grows, and as maturity grows, this area may not be an issue at all)
- Brainwashing “Experience” (Changing the way we think).
When people start trading, they have many things that distract them from the task at hand. This category is simply to be a place holder for all those thousands of memes, news events, sayings, negative emotions, positive emotions, and life experiences that paralyze the trader and often just distract us from the task at hand. All the financial news and discussion and conventional wisdom may make being a trader “fun”, but it doesn’t make you a good trader. People’ss playing in people’s heads must be washed from their action. You can still have “fun”, but not with your finances. You need to ignore what you don’t control.
Of these five categories, the first three (designated “CORE”) are where you want to spend most of your time. In fact, all your time after you get more experience and build your skills. Until that point though, the bottom two categories must be acknowledged and as quickly as possible, stricken from your action activities.
First step: Work on your technical skills. Make a list of what you need to work on and prioritize them. Give them high priority. You don’t want the technology to take your money or knock you out of the game. New tech means high priority to evaluate its impacts on you and prevent defects.
Second step: Make and maintain a list of the qualities of a good trader and evaluate yourself against them. Brainstorm and prioritize what you can do to address those issues and opportunities.
Third step: Find and test your strategies. Without a suite of strategies that fit your personality you aren’t going anywhere. Many jump right to the strategies without preparing the other areas, and that is a huge mistake. There is no rush. In fact, you will get further and faster along if you work on these steps in order.
Fourth step: Continue to “sharpen the saw” by reviewing and maintaining lists in each of these areas as an ongoing feature of your future expectation. As said earlier, the process is never over, but one of constant and planned change.
You will need to brainstorm and maintain these category lists to have a list to prioritize from. Get used to it, you have a lifetime to do it.