10 Ways Any Trader Can Get Better
06/21/2012 9:30 am EST
Difficult market conditions can easily frustrate traders and cause them to lose focus, writes the Staff at Netpicks.com, identifying ten functional areas every trader can work on to increase focus and improve results.
Right now, we’re clearly having to deal with a lot of news stories coming out of Europe on an almost daily basis. As such, we see elevated volatility, and there’s a greater perception of risk, so people feel they have to act.
But you know, when there’s an abundance of news flow and the market is visibly nervous about it, it’s all too easy to become wound up in the “what if’s” and start to really believe that the market must behave in a certain way.
The trouble comes when the markets don’t do what we expected them to, or even more dangerous, when they stop us out and move in the direction of our demised trade. Throwing a trading plan out the window because we see dollar signs is dangerous even in the best of times.
The spiraling out of control of emotions that can follow has not only the potential to devastate your account, but is also absolutely exhausting. And all for what, I ask you? One day of big profits? Is this genuinely what we believe to be the path to trading success?
See related: 3 Primary Causes of Losing Trades
There are what I like to call “epic days” on which the market moves so drastically that sure fortunes are made. But these are few and far between, and just as fortunes are made, they are also lost and meager accounts are destroyed.
Yet to those who keep their objectivity in check and adjust their expectations within the remit of their trading and risk plans, the rewards can be substantial. Just as the markets can generate more risk when they move violently, because of this very fact, they can present highly skewed opportunities to profit from.
If trading is a microcosm of life, then news days are a microcosm of trading. So make doubly sure that on these days, you act in the very best way you can (win, lose or draw), and make sure you don’t lose your focus! The critical point is to recognize when you aren’t fully focused and minimize the frequency of this happening.
The Skill of Centering
For me, this is possibly one of the biggest points of trader failure. Although it’s not exclusive to the retail trader, the “freedom” that trading brings can also be the Achilles heel of their performance.
Broadly, I believe that the core of focus comes from mental, physical, and emotional endurance and robustness. The problems come when a facet of one of these cores degenerates and then chaos theory starts to kick in. Problems often breed more problems.
So here is a list of the things that I feel may help or inhibit a trader’s ability to fully focus:
This is one of the roots to trading success. Without a level of self-belief, how are you going to have the will and determination to trade well or to do those tedious preparation tasks each day? This belief must come from within. You must truly believe.
We all should know by now the importance of a good diet for general health, but it’s also imperative to mental function. If you don’t want to have a great diet all the time and you enjoy a beer, just make sure you have a healthier diet during the trading week. It’s an easy compromise to make.
Again, although we all know how important exercise is for our health, it’s also extremely useful to help maximize our mental abilities and to reduce the levels of not especially useful hormones. For example, cortisol in particular is not a useful trading hormone, and regular exercise can help lower normal levels.
Okay, so whilst meditation isn’t for everyone, doing some form of activity which allows for deep levels of relaxation and reflection is of great benefit, I believe. It leaves you calmer, more balanced, and better able to maintain performance over longer periods of trading.
The ability to sustain levels of concentration over short and long periods of time can have great impact on a trader’s performance. Great trades can come in the first minute or after several hours of a trading session, so it’s important to keep your eye on the ball as much as you can.
Some traders can actually use strong emotions to perform better, but for me, it’s important to remain more balanced. Emotional imbalances can frequently take place either due to trading or due to outside influences.
Trading imbalances usually manifest in the form of being “on tilt,” to borrow a poker term. This is why loss limits are of sacred importance. The ability to maintain emotional balance in the face of a bad run can come with experience.
Outside influences to emotional balance come in many different guises. You might have a new baby or you might have a big argument with your partner or spouse. It’s important if you trade at these times to flag up the possibility that you may be already out of emotional balance.
Level of Distraction
Even if you trade from an office, there are always going to be other things going on that might distract you from your trading. However, if you trade from home, the possible levels of distractions can be pretty intense. The trouble is that family members in particular rarely fully understand the distractions they can cause you. You need to think of a way to protect your trading time somehow from these distractions.
Trying to work out what is going on at the best of times can be a tough task. So trading “blind” while having not done any preparation for the trading day is just going to add to the difficulty of the task and take your focus away from properly executing your trading plan. Do the work before and use trading time to concentrate on trading.
See related: Get Prepared Like a Pro
I know this sounds simple, but many people do not even have a comprehensive and clear strategy. So whenever they trade, they formulate best tactics on the fly. They don’t stick to a plan because they don’t have one, or it isn’t thorough enough to account for common situations.
Planning should be done before trading, so if you find there are situations coming up where you are not sure what you have to do, take your plan out and define the necessary rules.
Having clear goals might seem like an obvious thing. “I want to make a ton of money,” for example. But exactly what is your long-term plan to do this? What are your performance projections?
With a better grasp of where you are within a long-term plan, you are more likely to push on and be more accepting of inevitable bad days when they come.
Trading is never an easy task. But if you turn up in the best possible state and ready to go, then you’ll give yourself a much better chance to perform at the level you know you are capable of. Try to improve one thing from each of these sections and I’m pretty sure your level of focus will improve!
By the Staff at NetPicks.com