Process, process, process

Stick to the process and the results will take care of themselves.

Sounds simple enough right? However, it is a lot easier said than done especially to the average person ,who hasn't had any emotional or psychological coaching, the same as say that of a professional sportsman or woman. Add to this that when it comes to losing money, there's a whole other level of psychological pain at play which manipulates our thoughts, emotions, and ultimately our actions, and with this in mind that simple statement almost seems unachievable. Well, I am here to tell you that as an average person without access to top psychologists, and who like everyone else has a natural aversion to losing money, it is possible. It takes time, practice and patience, but you can do it.

When I first started trading I was like a scared little bunny. As I've said before in previous articles, no sooner had I opened a trade than I was looking for any excuse to close it and bank something, anything. Three points. Four points. Seven or eight points was huge! I justified this fear as me simply scalping because that suited my personality, and besides, I was happy to scalp. Bollocks! I was what's referred to in Poker parlance as 'scared money'. Basically someone who is so afraid of losing that their decision making is negatively impacted and as a result they will never play well, or anywhere near their potential.

As time went by and I kept losing, I could feel myself getting frustrated. Initially with the market, as with so many others it seemed as if it was 'against me' but then my frustration turned inwards, to myself. I knew deep down inside that what I was doing was not good trading, and if not addressed, it would lead to the forming of some very destructive bad habits which would be so much harder to change down the road. But more importantly, it was not how I wanted to trade. I longed to be able to hold a trade and stay in it as it moved in my favour, or not. I wanted to be taking profits that were in double figures. That to me, is trading. But to make this change was hard, very hard (and still is), and it didn't happen overnight that's for sure. In fact I can't actually pinpoint a specific time that I changed, it was more a gradual culmination of little things that began to come together. Now though, my trading is almost the complete opposite from when I first started. I hold trades until they stop me out and I am indifferent to the resulting loss. I readily and freely accept that it is simply a part of trading. Nothing else. Well mostly. I take signals almost without hesitation. I look to move my stops to break even as soon as is practical and I have recently begun to actually look to add to winning trades. In fact now, I have no real desire to scalp at all!

So what happened?

Like I said it wasn't one particular thing or one specific moment in time, but a gradual amalgamation of many things. It did began however with one particular book. Trading in the Zone by Mark Douglas. This book changes the way you view the markets. It makes you realise that the market is merely information, and how we choose to process it or label it is what affects our ability to trade. Also, it instills in you that trading is based firmly in probabilities and that there are key 'beliefs' that you need to adopt in order to be successful. If you haven't read it, then I suggest you make it a priority. Don't be concerned that it was written in 2000 as it's teaching and message are in my opinion, timeless. It essentially states that there are 5 key beliefs (and 7 additional but equally important beliefs) which you must observe in order to be a consistent, winning trader. I turned these into two posters and have them above my desk so I can read them every morning before trading to reinforce their message. It also gives you an exercise to complete which sounds simple, but I assure you it's not. That's the idea. This book planted the seed of change and so I began applying it's teachings.

Next was another equally important book called Best Loser Wins by Tom Hougaard. Again if you haven't read it I strongly suggest you do. It deals directly with the psychology of trading, your own psychology. It explains that in order to succeed in trading, you need to think differently to the 90%. You need to do mentally that which they cannot. As it says on the back cover, 'It is about mind management.' At its core is the exact process that Tom Hougaard uses to 'train' his mind to be ready and able to trade at levels most, it not nearly all, will never reach, unless that is they change their thinking.

The lessons and knowledge from both of these books gave me the fuel I needed to light the fire under my trading, with particular attention to my mindset and set about becoming the trader I know I can be.

So I began to enter trades, set a stop, and then hold it as long as I could. It wasn't easy at first. I would see my p&l and want to close it so badly, oh so badly, when it showed just a hint of profit. Every second it was in profit and I didn't close it was mentally painful, but as with lifting weights in the gym, that pain was in fact making me stronger. One thing that helped a lot was changing my p&l to show points instead of pounds (GBP). It took away that mental attachment to what I was seeing. They were now just numbers. A little like the same effect poker chips have. They look nothing like real money so it is much easier to toss in a £20 chip to call than to actually put in a £20 note. I would talk to myself. A lot! I would tell myself 'Don't you dare close that trade! You have absolutely no reason to.' In the beginning though many times I would suddenly find myself acting on impulse and I would hear the click of the mouse before I realised consciously what had just happened. However, as time went by the length of time I would hold a trade began increasing considerably before I started to get cold feet. In fact, just the other morning I held a trade for almost an hour and a half!

I started to meditate before the trading session began. Not long, only fifteen minutes, but it was long enough to quieten my mind and remove the usual distractions. Before I even placed a trade I had a calmness about me which I didn't have before. This in turn helped tremendously with my focus and my composure. Because I was now holding trades for longer, I began to have the presence of mind move my stop loss. Previously this was never an option as I was never in a trade long enough! Because of my new ability to hold a trade I felt a lot more in the moment.

I mindfully practiced discipline. At the top of my daily Trade Diary in big letters I write 'PATIENCE - FOCUS - DISCIPLINE' every day. I promised myself that I would follow my strategy almost religiously. I was not to trade until it dictated or generated a signal, and when it did I was to take it without hesitation. This meant I watched a lot of moves happen without me. Big moves, and I thought how nice it would've been to have been on board, but as I didn't have a signal, I wasn't. But I could actually take pride in the fact that I wasn't in because it meant I had had the discipline to stick to my strategy. That was good trading. Also in both books they mention that because the market is dynamic and in a constant state of flux, it will always generate more signals. There will always be other moves. So you should never worry about missing one. (If you take nothing else away from this article, make sure it is that.) Over trading is now no longer a concern because with the application of discipline, it is essentially impossible to do. In addition to this I will also happily close the broker and end the morning down if I run out of time. I won't carry on trading desperately trying to get back to 'evens'.

Now, don't think for one second that I am an emotionless trading machine. Far from it. I still will act, only occasionally, on impulse (emotion), and auto pilot close a trade. In part I think because I strongly dislike seeing unrealised profit disappear even if my stop is at break even because I am trading to make money after all, but also from fear. I am also very aware still of my fear of 'giving back' profit, especially if I am down on the morning. In fact I can give you an example of this form this morning.

When I started writing this it was Sunday night, and now it is Monday night, so another trading day has elapsed in between. I took my first trade at 08:47 which was SHORT in DAX at 15097 with a stop at 15122. At 08:55 I moved my stop to 15110 as the prior bar had just closed at 15093. Th next bar opened and continued down so I moved my stop down another 5 points. At this moment the doorbell rang and it was the guy to read the water meter. When I came back the bar had sold off to 15884 but then had rallied and the next bar ultimately stopped me out. I was down just under 8 points. No emotion, nothing. It's just trading. Let's focus on the next signal. It comes at 09:06 and I am in again at 15093 with my stop at 15111. Fifteen minutes later I am stopped out again. So now I am down another 18 points. Again no emotion. It is what it is. I am in fact happy because I followed the process. I took the trade when my strategy signalled without hesitation, and I had a good entry and stop. There is nothing to be unhappy about.

At 09:27 I get another signal to go SHORT. I enter at 15096 with a stop at 15115. The bar goes below the low of the last 9 bars (45 minutes) and closes at 15079.

Now this is where the emotion took over. If the next bar comes back to the Marubuzo of the prior bar (half way) I will usually give it a little leeway of a couple of points, but if it looks to go any further I will likely close the trade. It opened and immediately shot up. I quickly glanced at my p&l, my brain realised I was down but wasn't exactly sure how much, but the 16 points profit I was showing at that moment in time would certainly help to ease the pain somewhat. Click. The trade was closed. I honestly said to myself "Fuck! Why did I close it?" It wasn't even near my entry point." And then, well you can guess what happened.....for those that can't, it dropped a further 70+ points over the next two bars before closing at 15029.

So you see, although my trading has vastly improved and I am more composed, focussed and in control of my emotions and my thoughts, on occasion the natural fear in me is still strong enough and my subconscious instincts will override my conscious thoughts and intentions.

So this story brings me neatly to my next trading challenge. Adding to a winning trade. This is the hardest part of separating yourself from the 90%. But, the other morning I did just that. The trade I mentioned previously that I held for almost an hour and half, I actually added to it when it broke a specific level. Not only that but I had the presence of mind that when I added, I changed my broker ticket to £1 instead of £0.50 so that when I decided to close the trade, it would in fact close both positions at the same time as the close amount, (I have one click trading enabled so to close a long position I would simply click SELL and vice versa), would be double that of the original stake on both trades. Now the bummer is that my stop on my add was, in hindsight, a touch too tight and it ended up that I took profit on the original entry, but got stopped out of the add. I wasn't honestly sure if my stop should've been at the same level as the original entry, but I guess if I hadn't have been stopped out then I honestly wouldn't have had that as a question, as both would've show profit and I would've actually thought it was a good place for the stop. But I didn't get sad or annoyed. In fact quite the opposite. I was so happy because I had added to a trade! That's huge as far as I'm concerned.

So despite all of the above losses, which I see as undesirable, sure, it is progress. And progress in any endeavour never comes without a cost. I can say with genuine pride that I am a completely different trader than I was when I first started. In fact now I would actually refer to myself as a trader. I still have a long way to go that is for sure, but each day feels more and more like a step in the right direction.

My trading journey has only just begun and my trading itself is a work in progress, and always will be. In fact as I've said before, for me this journey doesn't have a final destination because there will always be something we can learn and improve, especially in ourselves. Success starts from within.