I was recently coaching a trader who had been trading for several years and had found some success with trading however his results had rather been inconsistent.
In our conversations he expressed growing frustration that he was missing a lot of winning trades due his inability to spot profitable setups in real-time even though he was spending hours studying charts and setups and felt as though he ought to be able to spot his go to setups.
At the end of the day he was at his wits end and felt as though his progress as a trader had stalled out.
This experience is unfortunately all to common but the source of the problem can be multi-dimensional which makes it difficult for many traders to diagnose the problem and come up with re-mediative action.
If you are encountering similar challenges then understand that the issue is rooted in the classic dichotomy between capability and capacity and the root cause is often a combination of one or all of the following 3 factors.
Perhaps the easiest issues to understand, identify, and remedy are those around focus.
We all well understand that poor focus will yield poor results.
So in addition to removing external distractions, time would be well spent to understand that each of us has our own unique capacity as it pertains to how much and how quickly we can process that information. A lot of this has to do with our cognitive processing speed and working memory.
Thus some traders can focus on a large list of instruments while other traders may be only able to focus on 1 instrument at a time. Some traders can trade charts on lower timeframes while other traders excel trading higher timeframes.
Because so much of this varies by individual the best practice is to begin to methodically track your own levels of focus based upon things like # on instruments, timeframe, # of setups, # of monitors, etc until you reach an ideal focus ratio based upon opportunity vs. efficiency.
What you will discover is that there is an optimum level at which you can juggle all of the variables before your performance degrades and you begin to make unforced errors.
The second potential issue is stress.
Stress isn’t the boogeyman that all of us have been led to believe.
In fact proper levels of stress can improve motivation and performance.
However when stress levels become too elevated we fall into the classic Freeze / Fight / Flight (FFF) response and we become physically incapable of performing at our desired levels.
The neuroscience behind this stems from the fact that the prefrontal cortex (PFC), the brain region responsible for activities like conscious thinking, goes offline when we become overly stressed as we shift more towards our more primitive sub-cortical regions of the brain.
Hence rational thought goes right out the window along with all of your good intentions and plans.
Finally an improper understanding of how skills are developed can lead to poor assumptions and unrealistic expectations.
The conscious competence learning model is an excellent framework which I use with clients, as well my own development, to offer a guide and roadmap towards the steps necessary to develop a skill to true competence.
Often times our inability to perform at our desired level of performance is a good indicator that we haven’t truly internalized a skill or that there exists tactical, mental, or emotional weaknesses that are holding us back.
The key is to have an objective assessment of your strengths and weaknesses and not to personalize setbacks as failures but rather as opportunities for further improvement.
As you can see a little bit of understanding around some core learning and performance principles can go a long way towards diagnosing and resolving unwanted trading behaviours.
I’m really excited about the webcast this coming Thursday where I will dive further into these keys themes and share some practical tactics and processes for you to back to your trading. I hope you will join me!