Thursday, October 13, 2005

Focus on the Process Now, Results Later

One of the ideas that I constantly stress to other traders while reminding myself is to focus on how you play the game. Most of us have advanced trading software which will tell us the “score” at any point in time as measured by our P&L. However, I feel it’s more important to focus on the process rather than the results. Here’s why.

The subject of one of my favorite websites, Kenny Rogers said that “there'll be time enough for countin’ when the dealin’s done.” Yes, he was talking cards, but the same lesson applies to trading. Focus on the trades on your trading list, execute them as they meet your criteria, and then later, when the market is quiet again and the day is over, look at your results. During market hours, following your game plan is what is most important.

Lessons of this sort have occurred to me on both sides of the market. I’ve had plenty of days when I started getting signals for trades which all started to work, quickly taking me over my profit expectations for the day. When I watched the results (P&L) during the process (in the middle of trading), my decisions were affected adversely. Wanting to get above a nice round number kept me in some trades too long, while the urge to book profit and bag a good day would other times cause me to take profit too early in good trades I should have kept. On some occasions, I would pass up new trades entirely which looked great, simply because I wanted to keep my profit intact. On losing days, I shifted into defense mode and passed up good potential trades simply to avoid further losses. Many times the trades on my sheet for the day would have bailed me out had I only taken them.

Ideally, a game plan is designed during an unemotional time when the market is closed. This promotes clear thinking, and then when the market is open you can just execute the trades you have planned on taking. Focus on this process, and look at your results later. You’ll find that sticking to your original plan will help you in the long run to achieve the success you want so badly.

The Stock Bandit


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