This One Trick Can Change Your Trading Results

Jun 13, 10:32 am
Trading goals

Repetition!

Yes, you read it right. Repetition!

Ever wondered why in the field of medicine, the doctors and surgeons at the top of their game often specialize in a single field? We take it for granted that Roger Federer can never fill the shoes of Messi on a soccer field and neither can Messi fill the shoes of Fedex at Roland Garros.

Some of the most successful people, be it sports, music, science and even trading often specialize in one thing. Bill Gross is called a Bond guru for a reason. When you think about stocks, Buffet often comes to mind. Sure, both the icons may have had some success dipping their hands outside their field of specialization, but they wouldn’t be at the top of their game, if not for their specialization.

Repetition is a psychological process recognized since the age of time. The process of repetition is so obvious that we often tend to ignore how powerful it can be. Not only can repetition help you to improve your process, but it can also subconsciously help you to find familiarity. Imagine being a crowded room and you suddenly hear a familiar jingle on the radio. The first thought that comes to your mind is the brand name that ad-jingle is associated with, having watched or heard the same ad over and over again.

Now imagine this same sense of familiarity when you are watching the markets. A familiarity of trade set up, born over endless hours of repetition can not only make you more confident in your trades but also keeps the emotional factor in check.

How can repetition help in your trading?

Traders in general often come with short attention spans. The urge to make money keeps many traders hopping from one currency pair to another, one trading system to the next, one trading course to another and so on. Of course, traders are not the only ones to be blamed. In this day and age of information overload, the financial media too hops from one big story to the next, making it hard for those without self-discipline to ignore the noise.

Amidst all that noise, sticking to a process and doing the same thing over and over again can help you to keep your focus. This process of repetition, when applied correctly and with the right mindset, can help you to even turn a trading system around as your subconscious mind kicks in. Your trading becomes more effortless, and you will notice that trading becomes a more natural phenomenon. Even the losing trades will not affect your trading psychology that much and your confidence grows by leaps and bounds.

Getting started with repetition to improve your trading

  1. Pick a trading system. It can be anything that you are fond of, or believe in. Even a straight forward two moving average system is more than enough
  2. Start a personal blog. Use any of the free resources available. From blogger.com to wordpress.com or even Google spaces.
  3. Every day at a certain time apply the trading template to one instrument for starters (pre-market or early Asian trading is ideal)
  4. Write down what the market is doing, how the indicators are lined up and what you think the markets will do for the day
  5. If you are just starting out, stick to an intraday time frame and slowly evolve this method to a daily time frame
  6. Write down the target levels and why you think the market will behave the way you outlined
  7. Also, write down an alternative plan
  8. Repeat this every day and build a continuous story. Build a follow through from your previous day’s analysis. Acknowledge that you were right, acknowledge that you were wrong, but base it on the facts. For example, “EURUSD did not rally to 1.120 yesterday despite the 10 EMA crossing over 20 EMA. The price fell to 1.10 instead. Draghi’s speech sent the euro lower” or “EURUSD rallied to 1.120 yesterday as expected. Draghi’s speech push the euro higher for the day”. Perhaps in a few days, you will likely know why prices behaved differently to what you expected.
  9. Within a few weeks, you will start to notice that a simple trading system such as using two moving averages can automatically turn out into a reliable trading system

This table should help give you an initial idea on how to start building a daily log, using the example of a moving average crossover system and combining fundamentals as well.

Date01/05/2016
CurrencyEURUSD (D1)
Price1.120
SignalBullish (10/20 EMA crossed over yesterday)
Today’s target1.125
Alt. target1.1185
Today’s fundamentalsGerman CPI expected to rise 0.30%
Yesterday’s fundamentalsEurozone CPI was higher than forecasts. 0.50% vs. 0.30%
My ViewEURUSD should continue moving higher to 1.125 because that’s where price formed support and broke it and this bullish crossover will target that same level
Yesterday’s viewExpected EURUSD to fall to 1.10, but it did not, instead, the EMA’s made a bullish crossover. Eurozone CPI was higher than expected

The psychology behind this method of repetition is very simple actually. When you look at your previous day’s trading analysis and acknowledge your mistakes, you actually make a subconscious effort into teaching your brain to start filtering out certain patterns or markers that occur in the markets. Over time, what you are left with is a lot of confidence and self-realization, as you acknowledge your strengths and weakness, and your mind starts to automatically point you to a potentially rewarding set up as well as keeping you out of a doubtful or a weak move in the markets.

To conclude, bear in mind that Messi, Federer, Gross, Buffet did not reach the epitome of success in a year.. not even in two.

Practice makes you perfect for a reason.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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