The Making of a Trader

Now when we start to look at process we often think about discipline and I want to make a point here because it's really important and its summed up best by this quote "No man ever steps in the same river twice , for its not the same river and he's not the same man"
Just like when we are trading the markets, when you are trading the market its never the same market because a moment to moment the dynamics are slightly different in term of who is in the market, why are they in the market, volume all this factors, and so there can be some similarities, it can be an uptrend, each uptrend has a uniqueness as well and every time you are trading from day to day you are actually changing to because experience from today will shape your brain in term of how you then approached markets tomorrow, you are not the same person tomorrow as you were today.

We have been consistently shaped by our experiences, so that really important to remember because a guess the old fashioned notion of discipline about having a plan, trading the plan.
And there is certainly good value in that but it's been researched in the US where they are looking at how do the best fund managers straight out, how they perform.
And one of the interesting things that are coming through is flexibility, what they call in military flexible responds, and that ability to have a plan but it's knowing when to stick to a plan and know when not to stick to a plan.
Lots of time spent on planning and preparation is really important but also at the moment to recognise the need to be flexible, and you can maximize your market returns, you need to develop you judgement and that flexible response.

When I talk about discipline its not just about having a plan and following the plan, its really about having a plan and then knowing when to follow the plan and when not to, and that is about judgement and that is developed through experience and through feedback loop and evaluations, not a short-term process and that's a goal.
That is part of becoming best trading self.

I have to return some videotapes...

Forex fundamentals revolve on Central Banks and markets expectation what that bank will do next.
The bank uses economic indicators to keep everything stable.

What factors affect your decisions?
If we think about good decision really is about good process some will win some will lose, if we can keep that core idea of making the trades of good process, that's fundamental to all trading and i think many of your realised when you got interference in your trading maybe when you are not at your best is often when you got too focused on how much money you are making, how much you are losing.
We have traders with behaviours wich they know they shouldn't be doing but they find themselves doing it.
So for example:

 

1. Taking profit too early
2. Running losses to far
3. Chased a loss
4. Not pulled the trigger
5. Taken excessive risk
6. Taken too little risk
7. Traded trough boredom
8. Overtraded

77% of people cut profits too early, 58% run losses to far, 35% chased a loss, 73% not pulled a trigger on good trading setup, 69% taken too much or too little risk so these are common trading behaviours and again because the market has a lot of uncertainty and because it has lot of uniqueness to the market, probably very difficult to stick to the plan all the time, there may be time when taking profit too early may be a good thing to do and times when not pulling the trigger might be the right thing to do.
But in general, we find that we find in my coaching these behaviors that traders want to do a lot less or get better at.
Interesting why is it?
The rules of trading are quite simple and clear, yet the practice of trading against the art of trading is where the difficulty comes in.
And one way of thinking about this comes from this model of decision making.

Observe ----> Orient ---->Decide ----> Act

Observing what's going around you, the orientation phase is making sense of what's happening, then deciding and then taking action.
So in trading terms you are sitting in front of your screens, you are observing market information, then we are orientating we are making sense of that it's like a big filtering system and don't think that's a slow process, it's very quick in microseconds, almost instant from wich we are making decision and taking action.
Orientational phase is fundamental, large of it will be outside conscious awareness and some of it in conscious awareness.
Think what might influence traders decision making, what kind of factors influence your decision?
Some say direction, news, previous losses, habits, risk-reward, boredom, fundamentals, patterns, stress, fear, greed, hope, overconfidence, good P&N.

Trader tendencies
cutting profits
running losses
taking excessive risk
not pulling the trigger
chasing losses

External factors
results/performance
environment-desk
floor,institution
life events
market conditions
date/time

Biases and heuristics
disposition effect
ambiguity aversion
loss aversion
regret aversion
endowment effect
anxiety aversion
overconfidence
short term/present
anchoring
herding

Biology
Testosterone
Gut feel
Dopamine

Emotions/feelings/mood
fear
regret
shame
anxiety
greed
stress

Perception/mindset
beliefs
thoughts

Energy levels/fatigue
physical
decision
self-control

This program is to reduce how this factors affect you and improve trading returns.
So let's start with what's really important wich is how we can make better decisions?
I will give you core approaches so you can make a difference.
This is model for making better decisions:

Understanding -------------------------------------------------------------------------------------------------->
what is the good decision?
discipline vs judgment
how you make decisions?
the factors that affect
your decisions

----------------------------------------------------Awareness ----------------------------------------------->
-----------------------------------------------------what are your strength and weaknesses?
-----------------------------------------------------when are your crucial moments?
-----------------------------------------------------what factors interfere with your decisions?

------------------------------------------------------------------------------------------------------------------------------Action-------------->
-------------------------------------------------------------------------------------------------------------------------------Niche/style
-------------------------------------------------------------------------------------------------------------------------------process/focus
-------------------------------------------------------------------------------------------------------------------------------journaling
-------------------------------------------------------------------------------------------------------------------------------know your motivations
-------------------------------------------------------------------------------------------------------------------------------mindset, emotions,behavior

So we look today the understanding part what is the good decision?
For me it's the following the process.
We talked about discipline vs process, flexibility, that maybe always sticking to the plan won't give you maximum returns, knowing when to flex open up an opportunity.
We looked at how we make decisions if I make the decision and I know what I was looking at I can start to ask myself what happened in the orientation phase.
What influenced that decision, what were filters inside that?
And we looked at factors that affect our decisions, so understanding is really a key, having a better understanding can have a positive impact on your own decision making.

The next factor is Awareness and I will take you through effective strategies, exercises wich are great for raising awareness.
Awareness is important, if you gonna control anything, you are going to manage anything then you need to have awareness first.
So building higher awareness is fundamental.
I will take you in front of 4 key strategies that you can implement that will have the significant impact on your decision making.

Let's start with Awareness.
Performance awareness
What factors affect your trading performance and decision making?
What helps you to trade and perform well?
What stops you trading well, what are the challenges?
Think of the time you are trading really well, what is it that's helping you trade well?
And that is interesting because a lot of people don't give a lot of thought to why are they trading well, and the reason for that is negativity bias in the brain.
The brain has bias towards negativity, weakness, lesses its far more interesting in those factors because they are more important to survive and the brain is the primary survival mechanism.
So winning, doing well is less important, brain pay less attention to it, however there is lot of value in paying attention to create success because if you want to make consistency and start to get more success you need to realise what are the factors that create success for you, how are you thinking, how are you feeling, how the market is trading, how are you trading.
What's happening outside trading, what are you paying attention to?
Whole number of factors that will be helping you trade well and likewise when trading is not going so well what is it that stops you from trading well, what are the challenges?
What is your mood and emotions like, whats energy like, what are you paying attention to, what is outside of trading?

So great exercise is to start getting the contrast between your best and your worst.
The more detail you can get about those 2 the better.
But it also allows you to start to get a sense of what's going on in the middle.
Am I more towards my best?
Am I more towards to my worst?
If I'm shifting wich way am I shifting?
Making money and losing money is not enough, they don't reflect good performance.
You can trade really well and lose, you could trade really bad and win.
Give that some real time because it's very important, get it into your arsenal.
The more you understand about your best and your worst and what comes in the middle as we go through the program looking at emotions, perception, thinking, energy you will be able to start to relate to it much more effectively and there will be more meaning.

So this exercise is really important.
You need to also think about Crucial moments.
All of us in trading have crucial moments , moments where we are at most risk, so one trader might be when they get into the market and it goes straight away against them that may be crucial moments when feelings and thinking may have interference into their strategy.
The moments where you are most likely to do the things in trading you shouldn't be doing.
So think what are your crucial moments?
When is your decision risk highest?
There are factors that increase decision risk.
It's stress, uncertainty, short time, energy, high emotion, outcome focus, mindset, motivation, attention.
Through the program, we will reduce this.
So again it's good exercise to do, think about your crucial moments, when is your risk highest, have that awareness, start using this technique.
Self Awareness is fundamental.

Now let's look at how you can improve decision making.
There are 3 dimensions
There is a trader, the strategies you trade, and the markets you trade.
All traders are unique and different, somewhere there is a perfect blend or the niche where you, your experience, your skills, your knowledge, your personality matches the strategies in the markets and gets you the best results.
And one of the goals in trading is to find what that is.
Many people spend time looking for the winning strategy, but when you been trading for a while you realize there isn't a winning strategy.
It's about finding the right strategies for the trade (you) and the right markets for you and relationship between those 3 things, that is the winning strategy.
It's the approach of blending those 3 things.

This is very very good info please keep it going. I started studying Macro Economic trading and got off track.

We touched a point on your trading process and it is important key.
The best example on this is: trader had such a big focus on pnl (pips/money), it was the only he cared about.
He ended up developing eye twitch, and that occurred at the start of the year when his pnl was back to 0, it was very stressful.
He started to measure how well he traded, and the way he chose that was he give himself mark out of 10, and he wrote why he gives himself 6 ,7, what is the reason.
Interesting over period of months the conversation was much more focused on process, but also he started to realise , he became much more aware what factors where effecting his outcome, he became much more aware what is key in that process, preparation was one of them, his general health and well-being was another, so this insight came out by really getting into process.
What was also really important on one occasion he took significant loss, he was upset and disappointed, he felt he traded well and he stayed process focused he saved lot of money.
Secondly few months later he had a good start to the year that he was happy with but more importantly no eye twitch.
The stress level was lower as he focused more on the process.
So it's interesting when we focus on the process, if we focus too much on the outcome anxious and that anxiety reduces blood flow to the cortex and it impacts decision making.
People with strong outcome focus also have more loss and disposition effect is when people are fast to cut their winners and slow to cut their losses.

You really need to think about your trading process and how well you are trading, not how much money you are making or losing, get back into the process.
What was the quality of my decision process?

Good trading habit is keeping a journal.
24% say that they keep a journal, 40% sometimes, 12% I used to, 24% No never.
It is really important to keep a trading journal.
It will make you better at decision making, without that it's very hard to self-correct.
It's sometimes difficult to start but when you start it becomes more painful to stop.

The last thing I want to touch in the term of strategy is Motivations.
It is important to think about your motivations, it's a big factor in decision making.
Why are you trading?
What do you want from trading?
What are your life/trading values?
What are your long term and short term goals?
You need to have the growth mindset, always try to be better, always try to develop, it's really important.

Develop a winning psychology
-----------------------------------------------------------------------------------------------------------------------
Cognition---------------------------------------------------------------Affect
(motivation, attention,perception)------------------------------------------------------ (mood, emotions, feelings)
-----------------------------------------------------------The Brain------------------------------------------

Physical Sensation------------------------------------------------- Behavioural
(heart, gut energy)---------------------------------------------------------------------------------(habits, actions)

This is the model that we are going to take forward with us from today, so we talked about few actions behaviors and approaches, talked about decision-making, awareness of decision making, finding a niche, focusing on a process, keeping a journal, motivations.
And then we will focus on cognition, affect, physical sensation, behaviors it all revolves around the brain.
We will look at this area and build a model wich help you with decision making and improve trading performance.

Here are a few things we looked at today:
Review and Action
Understanding trading performance and 4s
What is the good trading decision? using our 4 quadrants
What factors affect your trading decisions?
Developing Awareness
Actions- niche, process, journal, motivations

I don't understand why is this moved to trading discussion...

...thanks

Keep sharing please

Thanx TradinPsycho, which everyone day to day facing the troubles in the FX market u clearly mention it with the complete details,so every one can understand easily,which is more helpful for all kind of traders,including me,in coming days we are expecting more & more from u,thanx for ur Knowledge sharing my dear friend.

Hi guys, check this new platform on crowdfunding, it will be great https://www.indiegogo.com/projects/t...2/x/16066761#/