Monday, February 21, 2011

Is being POISED necessary for achieving high performance in trading?

Once again, POISED is a balanced state of readiness to act in one's own best interest and function in the service of performance values regardless of shifting thoughts and emotions.

The Pre-trade routine is the first component of POISED and is likened to the pre-shot routine in golf, it is deliberate, sets in motion a sequence of repetitive actions that helps a trader SEE opportunity, FEEL confident and TRUST their ability to execute at the right time. Preparation for a trader can include items such as a healthy breakfast, physical exercise, positive thinking or meditation practice, overnight market research, reviewing economic data releases, preparing potential trade scenarios, clarifying a daily execution goal and some form of emotional regulation routine.

Poised traders we coach enter their pre-trade perspectives into a digital document or shared calendar to enhance accountability, tracking and follow through with written insights. We’ve come to experience that if it’s not written or recorded somewhere, a trader can’t track what he/she did, and more importantly, they miss out on an ingredient of deliberate practice that supports development of expertise, namely, reviewing the path to making errors.

Our rationale is that in order to grow the mental muscle of confidence, we need the trader to do relevant tasks that demonstrate to themselves that their “walking the talk.” We’ve used Google apps, specifically the calendar and document applications that allow not only the trader to record and track progress, but when shared, allows a supportive coach to monitor and motivate dedication to the process. For example, traders can easily cut and paste pictures of charts with text and support/resistance lines into a online document for a richer collaborative experience, and even print it out and place it near their computer to help them adhere to their plan.

One trader experienced tremendous benefit from the pre-trade routine process by developing a market narrative on five different markets each day. He would rank the potential opportunities in order to help him scale his trade lot sizes ahead of the day. This enabled him to execute more efficiently when the scenario in his narrative took shape.

Another tool in the pre-trade box traders have used is heart rate biofeedback to train themselves in the art of emotional risk management. This software visually displays a chart formation that is similar to what a trading software program depicts. It provides a concrete representation of their emotional coherence (i.e., optimum state of readiness to execute decisions). By doing this for five to twenty minutes each day, a trader develops excellent self-regulation skills that assists them in beginning each day within a known and acceptable emotional range.

As you can see, getting prepared for the trading day takes sustained effort. It happens for an hour to two before the first trade is ever made; and can be likened to stretching before and after you go running. The best traders and algo systems are ready to take your money right now, thus, a trader needs to be at their peak state of performance prior to the open. POISED is not an option, it’s a necessity!

Do you believe a pre-trade routine (P) in trading is necessary for realizing consistent profits?

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