Behind Every One Of My Best Streaks Were These 3 Things…

While I was heading home
after the close yesterday
I was thinking, “What on earth am I going
to put in tomorrow’s column?  The market has been slow and with the barrage of
economic numbers slated to begin today, trading will become more a game of
reacting and trading around the news rather than a clearly defined plan in
advance.”

Luckily I was listening to
NPR
on the way home and there was an interview
with Neil Young.  Never did I think that his comments would provide some insight
into trading and a point to drive home in today’s column. 

We all know what a head game trading is,
sometimes the more we think, the worse we trade.  Trading is very much a game of
feel and anticipation.  The reporter asked Mr. Young a standard question that a
reporter may ask any musician,

“With regard to your guitar
solos how do you come up with them?”

“You know, it is funny you ask
that.  My guitar solos I equate to the process of excavating/boring deep into
the earth.  In essence you have a set of tools and it is your job to dig as deep
as you can.  With regards to guitar, I need to dig as deep as I possibly can to
tap into my creative side.  If I do not dig deep enough, I will “think” about my
solo rather then immersing myself in it.  The minute I think about it, the
creative process breaks down and I will likely just re-hash a solo I have done
in the past.  By digging deep and allowing myself to just trust what comes
along, I end up creating great sounds and best of all it is effortless.”

While my paraphrasing may have taken away some of
the effect, the point was clear and I immediately related it to trading.  I
recalled that every one of my best streaks as a trader was always during a time
where these things were present:

1.  ZERO hesitation in placing trades

2.  Little to no thought on trade execution after
the setup was identified

3.  Complete trust in an action that on an
objective level I could never have justified

We have all experienced these moments of
greatness, the difficult part is tapping into it consistently.  Again, the
objective part of our thought process does not easily allow for one to just go
for it based on a whole host of observations and instincts.  Since all of us
have been burned in the market at one point or another, we feel the need to be
“fully prepared” for each trade in order to prevent that same debacle from
happening again.  The way the market trades lately, I suspect that nagging
feeling is ever present.

My point, while simple, will take all of us a lot
of effort to perfect.  Once you have demonstrated a proficiency in your trading
approach and have data to back it up, you simply have no choice but to “dig
deeper” as Mr. Young says.  It is a very uncomfortable place to place oneself,
however, my experience has always been that once you do it, trades appear to be
almost effortless, and in most cases more profitable than any other trades you
take.

Mark Douglas has written a fantastic book on this
subject that goes into far more detail and explanation,
Trading in The Zone
, that I suggest everyone read.  I trust this
viewpoint was helpful.  It made sense to write this in the absence on any solid
trading ideas to dispense.

As always, feel free to send me your comments and
questions.

Dave Floyd

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