Do you enter trades that with hindsight don’t make sense? And this happens time and time again?
You may berate yourself, try to apply more discipline or agonize over the “error.” Imagine a world where you didn’t take those trades? What would your P&L look like at the end of the year? For some traders, taking out those trades that don’t fit the strategy will make a significant difference.
I was working with a client this morning (Let’s call him Brett) while he was trading real time and we created a “Pressure to Trade” indicator. He was generous enough to give me permission to share our work together with you. Brett is a very self-aware trader with a strong sense of returning value to his community.
Brett has a strategy that takes 4 indicators to create a setup. When the indicators create a related pattern, it produces very high probability short term trades. However, the setups may happen only once or twice a day in normal markets. Brett will occasionally trade outside of the setups, and these trades in total bring down his profits.
As we talked, it appeared that there are several mechanisms that Brett uses to create the internal “Pressure to Trade.” As we paid attention while he was trading in real time we came up with a list.
On the bottom of Brett’s screen are the indicators that feed his setups.
So we came up with the idea of putting his “Pressure to Trade” indicator on a hand written graph just like his trading indicators. When the indicator is triggered (i.e. noticing a “sigh” when a trade is missed) that indicator goes to the top of the graph and is red. If more and more of these indicators get to the top of the graph in red, then we know that that the next trade is more likely to push a setup or be a revenge trade. Brett is going to chart his “Pressure to Trade” indicators.
My rule for self-exploration is ALWAYS, “just be aware, don’t change a thing.” If we notice something in ourselves that we want changed without an understanding the positive intent we end up in a forced discipline that isn’t effective. (see my blog post on discipline). What indicators do you have that precede “off strategy” trades? Your list may be very different than Brett’s list.
As you build your self-awareness it is easier and easier to be aware of the internal mechanisms you use to create your own “Pressure to Trade.” You can increase your awareness by making your own list over the next couple of weeks of those “indicators” that are a “set-up” for off-strategy trades. As you build this indicator, refine it and test it, you may notice a change in behavior that happens naturally.
As always, I invite you to set up a free no obligation, no hype conversation to discuss exercises we can create for you to improve your profits.
A veteran broker and floor trader, Rich went from the "worst trainee trader ever", to building one of the most consistently profitable options trading firms on the Pacific Exchange by training his traders using neuroscience. Rich also holds a Masters Degree in Clinical Psychology, a B.A. in Philosophy, and is a graduate of the Gestalt Institute in San Francisco along with Master’s training in Neuro Linguistic Programming (NLP).
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