Successful Traders Practice
Darla was as frustrated as a grounded kid during a holiday weekend.
She looked at the Demand Zone trade that she had taken. It was on the
NQ. She had established her levels and the price action had taken a
drop-base-drop into a fresh DZ. She even looked at her odds enhancers
from which she determined that it was a high probability trade. Her plan
called for a 2-tick stop just below the lower line of the DZ on the 5
minute chart that she used to execute on. Then it happened; the price
action inched toward her stop and took her out. The good news was that
she allowed the stop to do its job; but unfortunately when she went back
through the plan afterwards, she realized that the stop was too
tight. That was when she understood that it would be supportive if she
practiced establishing her zones more carefully, which would include the
placement of her stops.
Mastering anything involves learning, incessant practice, and being
willing to fail…a lot. Failure is the secret key to success. That may
sound contradictory on the surface; however, true achievers and
champions will tell you that before they enjoyed the sweet smell of
consistent victory, they tasted the brew of failure. Actually, failure
is where the most important lessons are learned, and that is where
strength, endurance, perseverance and persistence are built. In other
words, you must create consistency in your diligent pursuit of protocols
(trading strategies, rules, procedures & set-ups) that are
supported by effective routines, which then are tracked through
documentation and then repeated to habituate the whole thing…that is
skill building. This skill-building formula for developing your
capacity to be better is supported by employing mental and emotional
tools to keep you focused on follow-through. Creating consistency in
doing the right things habitually will get you the right results
habitually…and that means you’ll enlarge your comfort zone in order to
tolerate the negative emotions like anxiety, fear and greed associated
with bad trading behavior. So, like Darla, embrace the realization that
you’ve got to practice, practice and practice some more. But, it’s not
just any practice. In this article, I’m going to share with you a
specific kind of practice; a practice that’s not really practice in the
normal sense but a step above and if you do it, it will ramp up your
learning and your results.
As children, you learned to model effective behavior by observing
your environment and using all of your senses to gather
information. From this observation, you began to develop strategies to
get the results you wanted and, in many cases, these strategies were
developed intuitively. But the higher and more complicated your
objectives, the more important it is that your strategies be conscious
in order to optimize the structure. To do this, you must consistently
look for and be receptive to feedback from your environment to: a)
Determine what strategies are likely to get the desired result; and b)
Modify or change that strategy if you’re not getting the result you
aimed for.
One of the ways to increase your chances of modeling or tracking
successful behavior is to use a template to lay your modeling structure
on. One way to do that is the Test Operate Test Exit method or TOTE.
The principal underlying TOTE is that your behavior is driven or
motivated by an outcome. You recognize when you have achieved the
outcome by a unique set of evidence criteria (i.e., what you will see,
hear, and feel when you have achieved the outcome, the vision of
success). You are constantly comparing your present state or reality to
your desired state or future reality to find out if they match. When
they do match, you know you have reached the exit and have achieved your
outcome. If the present state does not match the desired state, you
must complete another operation to discover if that makes a difference.
You are running TOTEs throughout your life comparing where you are
with where you want to be, taking actions to bring you closer, and
eventually to, the exit itself. Examples of this in everyday life
include:
- Learning to walk – you try and fail, changing this and that until you are successful
- Riding a bike
- Learning to play a game
- Learning a subject in school
- Trading
Another example from modeling successful traders is that successful
traders keep going until they have reached a successful T.O.T. E match
(their desired state of both the trade and their internal focused state
match, in other words, they are focused on doing only that which will
create consistency in keeping commitments and following rules. Whereas
others—those who do not naturally excel at trading, abandon the
T.O.T.E before they get the match and experience a distinct disconnect
between their desired state or trade result as in trading their plan and
following rules and the frustration associated with commitment
breakdowns. This may be due to fatigue, anxiety, distraction,
distortion, fear, greed or loss of confidence in their ability to
follow-through and achieve the outcome.
When I was in college, I knew a guy, Kyle, who was a great basketball
player. He did not begin as a great b-baller. In fact he did not play
much his freshman year. But everyday he would watch the older, more
accomplished players. He studied the way they moved, the way they
practiced, the way they held the ball, the way they dribbled and played
defense, the way they hustled, and the way they talked with passion. He
studied how they stretched and how hard they trained. He saw himself
going through practice as if it were a game; moving as they moved. With
every play that he learned, he imagined himself going through all of
the steps. By feeling the leather of the ball, hearing the swish of the
nets, feeling how his body felt when he dribbled through the defense
for a lay-up or charged the basket for a rebound, seeing the wholeness
of the court and sensing a balance of where everyone was, he would feel
the passion for playing, the excitement of each step. By breaking down
and “practicing” or T.O.T.E-ing this strategy, he became a great player.
When Kyle became successful from modeling his winning team members’
strategies, he was running a TOTE. He tried, failed, modified, tried,
failed, modified, tried, and so forth. You get the picture. He tested,
operated and checked for a match in desired outcome (state) vs. outcome
(state) attained. In other words, if the outcomes or states are not
equal and do not match, then back to operation #2, and test again. If no
match, then operation #3, then test and so on until they MATCH, then
exit.
When Kyle’s basketball outcomes, i.e., dribbling, passing, defense,
and shooting, all matched the desired outcome, he exited the TOTE for
that time, only to be repeated when he identified another level of
outcome of state to achieve. At that point, he would again run the TOTE
until he achieved the match. Furthermore, TOTEs can exist within
TOTEs. For example, dribbling can be a TOTE, passing can be a TOTE, and
so forth. Some TOTEs run every few minutes, some every few hours,
days, weeks or years. Another word in our lexicon for TOTEs is
practice; however, it is important to understand the concept of TOTEs
because the level of specificity greatly supports the system alignment
and effective coding of the successful strategy. To just say “practice”
is to leave much of the process incomplete. Essentially, the TOTE is a
feedback loop designed to prompt you to find what you need to achieve
your desired state. Key skills for successfully navigating the TOTE in
order to be able to model are: sensitivity to what is happening, a
willingness to learn from feedback, and the flexibility to do or learn
something different when what you are doing is not working.
So, as we look at trading it is important to establish T.O.T.E.’s as
you breakdown the important subcategories of the strategies that you are
using. These might be for example, establishing levels, planning,
execution, rule-set-up and following, identifying targets, etc. There
are many, many examples of trading categories and subcategories that you
can identify to run T.O.T.E.’s with. This is just another of the long
list of tools that we teach in Mastering the Mental Game that are
designed to support the building of your “A” Game high-rise to create
the consistent results that you want in your trading. Ask your Online
Trading Academy representative for more information. Also, my book, “
From Pain to Profit: Secrets of the Peak Performance Trader,” is available on Amazon.com.
Happy Trading.
ARTICLE SOURCE :
tradingacademy.com
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