What Can Be Controlled in Your Trading?

Where is Your Focus?

Recently during a webinar, I surveyed the traders what they were thinking about as they were trading.  Over two thirds of the group reported that their focus was on winning (or its cousin – not losing).  How about you?  When you are trading, what are you focused on?  It does seem reasonable that being focused on winning the trade is where your mind should be.

What’s remarkable about this is that two thirds of the traders I surveyed were focused on something they could not control. And by trying to push winning to the foreground of their minds, they missed the one thing they could control – their personal performance in the trade.  By focusing on their performance during the trade, traders control the one thing they can really control – the process of their trading strategy.

The Illusion of Control

What happens when you try to control something that you cannot really control?   Eventually you cave in, give up, become fearful, and/or start seeking revenge.  Not a pretty sight.  So why do so many traders keep concentrating on and doing something that does not work?  Because they are taught (from the cradle onward) that that is the way to win.  Why should trading be any different?

Because it is.  Traders have to let go of the illusion of control if they are to be successful in trading.  Their analysis gives them a prediction of what might happen, an educated guess.  Once they enter the trade, they may find that their hypothesis is wrong or right.  What happens if the trader is focused on winning in such a common situation?  They maintain that bias to be right even when the markets are showing them they are wrong.  And they fight being wrong.

The Aftermath

Consequently they don’t minimize the loss because they refuse to give up a sinking ship.  This is the black and white mindset of the motivational sign that hung in my high school football team’s locker room – Winners never Lose and Losers never Win.  This mindset is dangerous in trading, but it sure feels good.

Truth is, traders have to become really good losers as well as gracious winners.   Minimizing losses requires that the trader promptly acknowledge he/she is wrong and act to cut the losses.  This flies in the face of what traders are taught growing up and what they practice in their lives –   losing is bad.  But losing and winning are part of trading.  Until a trader learns how to lose well, it is impossible to become a consistently profitable trader because those losses clobber him – no matter how good his winning days are.

Making Adjustments

However, when the trader evolves, his/her view of winning and losing changes.  It is no longer about winning and losing (watching that P&L statement moment by moment) but, instead, becomes about managing the performance of process.  Process is the one thing that the trader can control.  And if he/she does maintain focus on process, both psychology and methodology work together to form an edge.

How do you learn to do that?  You can learn how to regulate emotions, observe, and become designer of the mind you bring to the performance of trading.  Come learn with us.  Learn how to produce the disciplined mind that trades.  Act now, rather than just thinking about it.  Find the opportunities to grow in this newsletter.  And be willing to evolve.

To learn more from Rande, be sure to check out some of his other articles at TradersStateofMind.com.