If we think about good decision really is about good process some will win some will lose, if we can keep that core idea of making the trades of good process, that's fundamental to all trading and i think many of your realised when you got interference in your trading maybe when you are not at your best is often when you got too focused on how much money you are making, how much you are losing.
We have traders with behaviours wich they now they should be doing but they find themselves doing it.
So for example
- Taking profit too early
- Running losses to far
- Chased a loss
- Not pulled the trigger
- Taken excessive risk
- Taken too little risk
- Traded trough boredom
- Overtraded
77% of people cut profits too early, 58% run losses to far, 35% chased a loss, 73% not pulled a trigger on good trading setup, 69% taken too much or too little risk so these are common trading behaviours and again because the market as a lot of uncertanty and because it has lot of uniqueness to the market, probably very difficult to stick to the plan all the time, there may be time when taking profit too early may be a good thing to do and times when not pulling the trigger might be the right thing to do.
But in general, we find that we find in my coaching these behaviours that traders want to do a lot less or get better at.
Interesting why is it?
The rules of trading are quite simple and clear yet the practice of trading against the art of trading is where the difficulty comes in.
And one way of thinking about this comes from this model of decision making.
Observing what's going around you, the orientation phase is making sense of what's happening,then deciding and then taking action.
So in trading terms you are sitting in front of your screens, you are observing market information, then we are orientating we are making sense of that it's like a big filtering system and don't think that's a slow process, it's very quick in microseconds, almost instant from wich we are making decision and taking action.
Orientational phase is fundamental, large of it will be outside conscious awareness and some of it in conscious awareness.
Think what might influence traders decision making, what kind of factors influence your decision?
Some say direction, news, previous losses, habits, risk-reward, boredom, fundamentals, patterns, stress, fear, greed, hope, overconfidence, good P&N.
Trader Tendencies
Trader tendencies Biases and heuristics Emotions/feelings/mood
cutting profits disposition effect Fear
running losses ambiguity aversion regret
taking excessive risk loss aversion shame
not pulling the trigger regret aversion anxiety
chasing losses endowment effect greed
anxiety aversion stress
External factors overconfidence Perception/mindset
results/performance short term/present Beliefs
environment-desk anchoring thoughts
floor,institution herding Energy levels/fatigue
life events physical
market conditions Biology decision
date/time Testosterone self-control
Dopamine
Gut feel
Our program is to reduce how this factors affect you and improve trading returns.
So let's start with whats really important wich is how we can make better decisions?
The whole program has been designed with that intention.
I will give you core approaches so you can make a difference.
This is model for making better decisions:
Understanding -------------------------------------------------------------------------------------------------->
what is the good decision? Awareness -------------------------------------------------------------->
discipline vs judbemt what are your strength and weaknesses? Action-------------->
how you make decisions? when are your crucial moments? Niche/style
the factors that affect what factors interfere with your decisions? process/focus
your decisions journaling
know your motivations
mindest, emotions,behaviour
So we look today the understanding part what is the good decision?
For me its the following the process.
We talked about discipline vs process, flexibility, that maybe always sticking to the plan won't give you maximum returns, knowing when to flex open up an opportunity.
We looked at how we make decisions if I make the decision and I know what I was looking at I can start to ask myself what happened in the orientation phase.
What influenced that decision, what were filters inside that?
And we looked at factors that effect our decisions, so understanding is really a key, having a better understanding can have a positive impact on your own decision making.
The next factor is Awareness and I will take you through effective strategies, exercises wich are great for rasing awareness.
Awareness is important, if you gonna control anything, you are going to manage anything then you need to have awareness first.
So building higher awareness is fundamental.
I will take you in front of 4 key strategies that you can implement that will have the significant impact on your decision making.
Let's start with Awareness.
Performance awareness
What factors affect your trading performance and decision making?
What helps you to trade and perform well?
What stops you trading well, what are the challenges?
Think of the time you are trading really well, what is it that's helping you trade well?
And that is interesting because a lot of people don't give a lot of thought to why are they trading well, and the reason for that is negativity bias in the brain.
The brain has bias towards negativity, weakness, lesses its far more interesting in those factors because they are more important to survive and the brain is the primary survival mechanism.
So winning, doing well is less important, brain pay less attention to it, hovewer there is lot of value in paying attention to creates sucess because if you want to make consistency and start to get more suceess you need to realise what are the factors that create sucess for you, how are you thinking, how are you feeling, how the market is trading, how are you trading.
Whats happening outside trading, what are you paying attention to?
Whole number of factors that will be helping you trade well and likewise when trading is not going so well what is it that stops you from trading well, what are the challenges?
What is your mood and emotions like, whats energy like, what are you paying attention to, what is outside of trading?
So great exercise is to start getting the contrast between your best and your worst.
The more detail you can get about those 2 the better.
But it also allows you to start to get a sense of whats going on in the middle.
Am I more towards my best?
Am I more towards to my worst?
If I'm shifting wich way am I shifting?
Making money and losing money is not enough, they don't reflect good performance.
You can trade really well and lose, you could trade really bad and win.
Give that some real time because it's very important, get it into your arsenal.
The more you understand about your best and your worst and what comes in the middle as we go through the program looking at emotions, perception, thinking, energy you will be able to start to relate to it much more effectively and there will be more meaning.
So this exercise is really important before we get to section 2.
You need to also think about Crucial moments.
All of us in trading have crucial moments , moments where we are at most risk, so one trader might be when they get into the market and it goes straight aways against them that may be crucial moments when feelings and thinking may have interference into their strategy.
The moments where you are most likely to do the things in trading you shouldn't be doing.
So think what are you crucial moments?
When is your decision risk highest?
There are factors that increase decision risk.
Its stress, uncertainty, short time, energy, high emotion, outcome focus, mindset, motivation, attention.
Through the program, we will reduce this.
So again its good exercise to do, think about your crucial moments,when is your risk highest, have that awareness, start using this technique.
Self Awareness is fundamental.
Now let's look at how you can improve decision making.
There are 3 dimensions
There is a trader, the strategies you trade, and the markets you trade.
All traders are unique and different, somewhere there is a perfect blend or the niche where you, your experience, your skills your knowledge, your personality matches the strategies in the markets and gets you the best results.
And one of the goals in trading is to find what that is.
Many people spend time looking for the winning strategy, but when you been trading for a while you realise there isn't a winning strategy.
It's about finding the right strategies for the trade (you) and the right markets for you and relationship between those 3 things, that is the winning strategy.
Its the approach of blending those 3 things.
We touched a point on your trading process and it is important to key.
The best example on this is: trader had such a big focus on pnl (pips/money), it was the only he cared about.
He ended up developing eye twitch, and that occurred at the start of the year when his pnl was back to 0, it was very stressful.
He started to measure how well he traded, and the way he chose that was he give himself mark out of 10, and he wrote why he gives himself 6 ,7, what is the reason.
Interesting over period of months the conversation was much more focused on process, but also he started to realise , he became much more aware what factors where effecting his outcome, he became much more aware what is key in that process, preperation was one of them, his general health and well being was another, so this insight came out by really geting into process.
What was also really important on one occasion he took significant loss, he was upset and disappointed, he felt he traded well and he stayed process focused he saved lot of money.
Secondly few months later he had a good start to the year that he was happy with but more importantly no eye twitch.
The stress level was lower as he focused more on the process.
So it's interesting when we focus on the process, if we focus too much on the outcome anxious and that anxiety reduces blood flow to the cortex and it impacts decision making.
People with strong outcome focus also have more loss and disposition effect is when people are fast to cut their winners and slow to cut their losses.
You really need to think about your trading process and how well you are trading, not how much money you are making or losing, get back into the process.
What was the quality of my decision process?
Good trading habit is keeping a journal.
24% say that they keep a journal, 40% sometimes, 12% I used to, 24% No never.
It is really important to keep a trading journal.
It will make you better at decision making, without that it's very hard to self-correct.
It's sometimes difficult to start but when you start it becomes more painful to stop.
The last thing I want to touch in the term of strategy is Motivations.
It is important to think about your motivations, its a big factor in decision making.
Why are you trading?
What do you want from trading?
What are your life/trading values?
What are your long term and short term goals?
You need to have the growth mindset, always try to be better, always try to develop, it's really important.
Develop a winning psychology
-----------------------------------------------------------------------------------------------------------------------
Cognition Affect
(motivation, attention,perception) (mood, emotions, feelings)
The Brain
Physical Sensation Behavioural
(heart, gut energy) (habits, actions)
-----------------------------------------------------------------------------------------------------------------------
This is the model that we are going to take foward with us from today, so we talked about few actions behaviours and aproaches, talked about decision making, awarness of decision making, finding a niche, focusing on a process, keeping a journal, motivations.
And then we will focus on cognition, affect, physical sensation, behaviours it all revolves around the brain.
We will look at this area and build a model wich help you with decision making and improve trading performance.
Here are a few things we looked at today:
Review and Action
Understanding trading performance and 4s
What is the good trading decision? using our 4 quadrants
What factors affect your trading decisions?
Developing Awareness
Actions- niche, process, journal, motivations
Let's start with Awareness.
Performance awareness
What factors affect your trading performance and decision making?
What helps you to trade and perform well?
What stops you trading well, what are the challenges?
Think of the time you are trading really well, what is it that's helping you trade well?
And that is interesting because a lot of people don't give a lot of thought to why are they trading well, and the reason for that is negativity bias in the brain.
The brain has bias towards negativity, weakness, lesses its far more interesting in those factors because they are more important to survive and the brain is the primary survival mechanism.
So winning, doing well is less important, brain pay less attention to it, hovewer there is lot of value in paying attention to creates sucess because if you want to make consistency and start to get more suceess you need to realise what are the factors that create sucess for you, how are you thinking, how are you feeling, how the market is trading, how are you trading.
Whats happening outside trading, what are you paying attention to?
Whole number of factors that will be helping you trade well and likewise when trading is not going so well what is it that stops you from trading well, what are the challenges?
What is your mood and emotions like, whats energy like, what are you paying attention to, what is outside of trading?
So great exercise is to start getting the contrast between your best and your worst.
The more detail you can get about those 2 the better.
But it also allows you to start to get a sense of whats going on in the middle.
Am I more towards my best?
Am I more towards to my worst?
If I'm shifting wich way am I shifting?
Making money and losing money is not enough, they don't reflect good performance.
You can trade really well and lose, you could trade really bad and win.
Give that some real time because it's very important, get it into your arsenal.
The more you understand about your best and your worst and what comes in the middle as we go through the program looking at emotions, perception, thinking, energy you will be able to start to relate to it much more effectively and there will be more meaning.
So this exercise is really important before we get to section 2.
You need to also think about Crucial moments.
All of us in trading have crucial moments , moments where we are at most risk, so one trader might be when they get into the market and it goes straight aways against them that may be crucial moments when feelings and thinking may have interference into their strategy.
The moments where you are most likely to do the things in trading you shouldn't be doing.
So think what are you crucial moments?
When is your decision risk highest?
There are factors that increase decision risk.
Its stress, uncertainty, short time, energy, high emotion, outcome focus, mindset, motivation, attention.
Through the program, we will reduce this.
So again its good exercise to do, think about your crucial moments,when is your risk highest, have that awareness, start using this technique.
Self Awareness is fundamental.
Now let's look at how you can improve decision making.
There are 3 dimensions
There is a trader, the strategies you trade, and the markets you trade.
All traders are unique and different, somewhere there is a perfect blend or the niche where you, your experience, your skills your knowledge, your personality matches the strategies in the markets and gets you the best results.
And one of the goals in trading is to find what that is.
Many people spend time looking for the winning strategy, but when you been trading for a while you realise there isn't a winning strategy.
It's about finding the right strategies for the trade (you) and the right markets for you and relationship between those 3 things, that is the winning strategy.
Its the approach of blending those 3 things.
We touched a point on your trading process and it is important to key.
The best example on this is: trader had such a big focus on pnl (pips/money), it was the only he cared about.
He ended up developing eye twitch, and that occurred at the start of the year when his pnl was back to 0, it was very stressful.
He started to measure how well he traded, and the way he chose that was he give himself mark out of 10, and he wrote why he gives himself 6 ,7, what is the reason.
Interesting over period of months the conversation was much more focused on process, but also he started to realise , he became much more aware what factors where effecting his outcome, he became much more aware what is key in that process, preperation was one of them, his general health and well being was another, so this insight came out by really geting into process.
What was also really important on one occasion he took significant loss, he was upset and disappointed, he felt he traded well and he stayed process focused he saved lot of money.
Secondly few months later he had a good start to the year that he was happy with but more importantly no eye twitch.
The stress level was lower as he focused more on the process.
So it's interesting when we focus on the process, if we focus too much on the outcome anxious and that anxiety reduces blood flow to the cortex and it impacts decision making.
People with strong outcome focus also have more loss and disposition effect is when people are fast to cut their winners and slow to cut their losses.
You really need to think about your trading process and how well you are trading, not how much money you are making or losing, get back into the process.
What was the quality of my decision process?
Good trading habit is keeping a journal.
24% say that they keep a journal, 40% sometimes, 12% I used to, 24% No never.
It is really important to keep a trading journal.
It will make you better at decision making, without that it's very hard to self-correct.
It's sometimes difficult to start but when you start it becomes more painful to stop.
The last thing I want to touch in the term of strategy is Motivations.
It is important to think about your motivations, its a big factor in decision making.
Why are you trading?
What do you want from trading?
What are your life/trading values?
What are your long term and short term goals?
You need to have the growth mindset, always try to be better, always try to develop, it's really important.
Develop a winning psychology
-----------------------------------------------------------------------------------------------------------------------
Cognition Affect
(motivation, attention,perception) (mood, emotions, feelings)
The Brain
Physical Sensation Behavioural
(heart, gut energy) (habits, actions)
-----------------------------------------------------------------------------------------------------------------------
This is the model that we are going to take foward with us from today, so we talked about few actions behaviours and aproaches, talked about decision making, awarness of decision making, finding a niche, focusing on a process, keeping a journal, motivations.
And then we will focus on cognition, affect, physical sensation, behaviours it all revolves around the brain.
We will look at this area and build a model wich help you with decision making and improve trading performance.
Here are a few things we looked at today:
Review and Action
Understanding trading performance and 4s
What is the good trading decision? using our 4 quadrants
What factors affect your trading decisions?
Developing Awareness
Actions- niche, process, journal, motivations
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