Herb is a Futures Index day trader. He has been actively trading for several years. His profits are erratic and undependable, often going dramatically up and down in the same session. When Herb is making money his confidence soars and he feels like a power trader. On the other hand, when he loses money, which is more times than he cares to admit, he feels like a failure, a loser and stupid. Herb has wondered for some time why he can’t be consistently successful, and why his drawdowns tend to be much larger than his profits. He wonders this even though he has no Business Trade Plan, doesn’t consistently document his trades and despite having numerous rules, tends to violate them regularly. Herb has no clue and wonders why he can’t get different results even though he continues to do the same thing. Herb is out of control and unless he changes he is headed for a financial ice-cold shower. Are you Herb?
Among the first things that you must accept in becoming consistently successful is the notion of continuously focusing on your “skill building.” Actually, in any performance oriented endeavor there is an equation that directly speaks to how to skill build. This equation is P + EF + FL + H = Skill Building. The P is for protocols, which is a series of sequentially ordered steps toward an aim or a goal. Protocols are in all disciplines and professions; such as medicine, law, accounting, the military, academia, etc. When participating in the markets, protocols include strategies, set-ups, rules and procedures for preparing, analyzing, processing and executing a trade.
When a protocol has been identified, you must add to that Effective Routines (the ER). Routines help to bring consistency to your behavior and help to neutralize it as a variable in your trading. Inconsistent or erratic behavior is difficult to manage and leads directly to doing something that is not in the interests of your highest and best trader. The “effective” aspect of routines means that you are choosing your routines deliberately in order to ensure that you are moving closer to your goal of real follow-through.
Once you have your routines in… Continue Reading
