Trading is a skill-set. It is a set of skills that you spend a lot of time practicing. When these skills are mastered, you are able to take money from the market at will. Trading is probably also one of the most difficult skill-sets to learn and master.
The reason for this, I think is threefold.
- One, because there are practical skills that need to be learned, like technical analysis or reading the tape.
- Two, because no matter how good you are, the most critical skill is self control (the 4 A’s of Emotional Control might help you here).
- And three, because the only way to practice these skills is to do it with real money, which can be expensive.
Deliberate practice is one way to master these various skills. The idea behind deliberate practice is to identify an area or skill that you need to work on and then to spend the necessary time working on just that skill.
For example, I struggle with hesitation. Sometimes I hesitate to take off a position when I have the opportunity, or to put on a position when the opportunity presents. That momentary hesitation often costs me money, or prevents me from getting into a trade in which I could make money. Therefore, I have been working on not hesitating. I have spent a few days not caring about my PnL, but rather measuring my success at not hesitating when I saw an opportunity.
Another issue I have, which is probably my biggest one, is self control. When the down days come, I tend to lose the plot a little and allow them to run away with me. This, as you can imagine, is disastrous because it leads to big down days which erode my capital and my confidence. Therefore, one of the crucial skills for me to practice is to keep within my maximum down limit for the day.
This sounds silly perhaps, but over the long term it is crucial for survival. In this example, I can deliberately practice my emotional awareness. The deliberate practice here would be to make sure that I am aware of my emotional state throughout the course of the day. And then have the discipline to walk away when I am no longer in a state to trade successfully.
These are both mental skills so the only way I will be able to improve is to spend trading days deliberately practicing them. In other words, focus only on those two particular skills for the day. Ideally, it should only be one skill on any given day, but like I said, practicing skills with real money can become expensive. While I am practicing to not hesitate, I need to make sure I don’t lose more than I can afford.
So that is my personal challenge at the moment. Master those two skills, and then find the next skill to tackle. What skills do you need to work on?
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