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Friday, April 28, 2017

Focus on the trading process not the money

It may seem a contradiction to say that you don’t want to pay attention to the profit of a trade.  In fact, many of you might be saying that this guy must be smoking rope to say that profit is unimportant.  Well, to clarify, that is not what is being said.  Of course, profit is one of the main reasons why you are involved in trading in the financial markets.

However, when we discuss how you will garner your mental and emotional resources in order to become consistently successful, profit (in any one trade) is not where you want your focus to be. Profits come as a result of “probabilities” over a series of trades. In fact, profit can be a major distraction and the cause of erratic behaviors that beget unwanted results.  Let’s face it, results, consistent positive results, are what you want.Tweet: Let’s face it, results, consistent positive results, are what you want. Anything else is unacceptable.  So, your main trading trajectory must encompass this reality.  Consistently successful trading requires a laser focus on what-matters-most; alignment of body, mind and emotions; and an ability to be truly disciplined, for starters.



Honing your trading process and the focus of your trades.

The Distraction of Trading Profits
Let’s look at how focusing on profit can position you to attract the very undesirable results that you want to avoid.  Profit is transient which means that it is not only variable but it is random to the point of being capricious.  No matter how good your methodology, you cannot predict what price action will do.  The only thing that is certain about the markets is that they are unpredictable.   Due to this level of randomness, profit is an extremely inefficient data point to measure against results.

In fact, one of the worst things that can happen to you as a trader is to be profitable early in the game before you intimately know your strategy.  This type of profit is almost invariably luck.  Luck is totally unsustainable; and in your attempt to replicate these results you will reinforce bad rule violating behavior that is very hard to halt, creating many more losses as you attempt to extricate yourself from that abyss.  Furthermore, when you focus on profit alone, your attention is fragmented and your mental state is susceptible to distorting data due to a confirmation bias (the tendency to only perceive information that confirms your limiting beliefs about the current market and consequently denying information that is contrary but critically important).

Free Trading WorkshopActually, you want to approach the trading process with your eyes wide open and embracing the fact that any trade can lose, and some will.  No matter how strong your strategy, you must accept the randomness of the markets and therefore be very serious about protecting your capital; in other words, using and relying on your stops.  In this way, you will begin to manage your fear…a very important skill.

One of the facts about consistently successful traders is that many of them have blown up accounts; and they came back.  When this happened, they realized that the world didn’t come to an end and developed a deeper appreciation for the importance of their stops.  They created consistency in planning their trades, trading their plan, following all of their rules, and thereby developed the capacity for emotional strength and endurance in the trade.

Trading is a process oriented endeavor for those who are serious about becoming and remaining a consistently successful trader.  In any one trade, it is not about the outcome.  You must remain dispassionate about that and reserve all of your focus to be honed on what you are doing and how you are doing it.  This is what we teach in Mastering the Mental Game online and on-location courses.  Ask your Online Trading Academy representative for more information.  Also, get my book: From Pain to Profit: Secrets of the Peak Performance Trader.

Joyous Trading

Author: Dr. Woody Johnson

Article reproduced with kind permission of the author.



  The article is ended with more helpful quotes:

One of the biggest mistakes that newbie traders make is to give up on a trading strategy after a run of losing trades. The thinking behind doing this is understandable but very wrong. The thought is “If a strategy is losing trades, why keep doing it?” The point is that every trading strategy has losing trades!” – Jasper Lawler 


“Always keep in mind that trading is mainly a mind-game playing probabilities. Try to find a strategy that you understand and that fits to your personality and possibilities and then try to build the trade management together with the risk management around it. This will lead to much better results then searching for the best entry technique of all times.” – Andy Jordan


“Trading is not for anyone who has an unquenchable thirst for certainty. Uncertainty in trading is co-equal with insecurity.” – Joe Ross


“However, the truth is probably like most things somewhere in the middle and eventually with a level playing field (which there will probably never be) it comes down to the individual. In part this is why I like trading, it is a reflection of who you truly are, not what your circumstances have made. The market has no idea where you are from, what your social status is, your colour, your religion or your sex. It merely knows whether you have the attributes of a good trader or you don’t.” – Chris Tate



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