Trading breakdown image by Mitchell Luo from Unsplash

Where Does Your Trading of the Markets Break Down?

Where do your trading behaviors break down?

… and what steps can you take to get to your goals? I will give you a link to a great download to help you do this. Alright,… let’s get started.

Trading is a complex adaptive process.

The markets are complex. Strategies are unclear. Setups can be vague. Execution timing can be debated. Our brains filter and distort information. Our brain contains reactive neural circuits, driven by pre-programmed subroutines we are unaware of.

With all of this, we can still trade and be successful. How can this be?
What do we need to do to get to our goals?
How do we find out what stops us from getting the success we want?

The best state of mind to take advantage of this exercise is:

1. Feel curious
2. Be non-judgmental
3. Feel open to all experiences
4. Be willing to explore your own inner world
5. Be OK with all discoveries
6. Love all outcomes

I am going to introduce an exercise that is designed to break down the trading process in fixable bites. We do this so you can laser focus on the critical issues that need to be fixed. We can then focus on replacing the trading behaviors that no longer serve you with new trading behaviors that produce the results you want.

If trading requires 10 correct functions to be successful and three are broken, it is challenging to be consistently profitable. We need to fix all three. If we are unaware of two of them, it can be frustrating when we make progress and still don’t get to our goals.

So, let’s break it down and create a simple path so we can observe exactly where our trading success works well and where it is sabotaged. Let’s do this, one step at a time.

STEP 1: Create a simple trading strategy.

This strategy:
1. can be described in a way that anyone can execute it
2. It has clear setups
3. It has clear stops and target exits with a good risk/reward ratio
4. It will create enough trades to get a good sample size of executions
5. It will be active enough to generate at least two trades a day. The more the better!

This strategy doesn’t even need to be profitable. It just needs to be clearly defined.

STEP 2: Start a new simulated or demo account with no trading history.

In this account, trade this strategy for at least 30 trades or one month, whichever comes first. The more trades the better.

STEP 3: Put your trading process into slow motion.

Now, we are going to take advantage of our “slow motion” trading by journaling the experience. This way we can get hints as to what is breaking down.

First we are going to journal our experiences to see how our brains are managing the trading decision processes. A sample journal using an Excel spreadsheet can be downloaded.

With every trade, you are going to become aware of three internal processes that add up to your state of mind or what we call your SET score.

1. Sensations (physical)
2. Emotions or feelings
3. Thoughts as they pass through your head

Score yourself on a scale of -5 (worst ever) to + 5 (best ever). A score of “0” is neutral. Please just be curious about the results. Do NOT try to change anything. Just be a neutral observer and watch with curiosity as patterns emerge.

STEP 4: Check your trade execution results.

We are not concerned about P&L now, just our execution patterns. Use the spreadsheet to keep track of your execution results.

This spreadsheet keeps track of the trades that are executed according to strategy and plan. Instructions are below the entries and each heading has an explanation when you mouse over it.

Do this for a minimum of 30 trades or for 4 weeks, whichever comes first. Now you have some great data to see what has happened and what you can work on to make a difference in your bottom line.

What is your experience? If you find that your S.E.T. score records a lot of tension, stress, negative feelings and thoughts, that means that you can work on this area to make significant improvements.

Did you execute? If you find that you are not executing the strategy to produce “Lucrative Trades” (trades that are executed according to plan, win or lose) then you can look at what stops you.

Where did your Trading Break Down?

With this simple “simulation” we can tease out what is stopping you from becoming the success you want.

The Mind Muscles Academy course “Trader’s Compass” gives you additional frameworks, assessments, simulations, and exercises. These add up to create new “Mind Muscles” that unleash the powerful trader inside of you.

You can begin with these exercises, and if you want to continue to expand your knowledge download the ebook “Stop Fighting Your Brain” or the Guided Visualizations.