Wednesday, January 07, 2009

Keys to Solution-Focused Trading

Many traders seek assistance for the problems they encounter in markets. They are focused on the holes in their trading: the areas where they are failing to achieve their goals. They think about their problems, they set goals to correct their problems, they work on their problems, they discuss their problems. In a nutshell, they become problem focused. The more they focus on their deficits, the more they feel deficient. Ironically, their efforts at self-improvement only serve to reinforce a negative, problem-based view of themselves.

A different approach is what is known as a solution-focused approach to change. Instead of focusing on what is going wrong, you focus on goals: what you want to go right. Once you identify--in concrete, positive terms--what you'd like to be doing differently, then you can focus on occasions in which you are already achieving those goals, even in small measure. Instead of asking a trading guru, for example, where you should place your stops or time your entries, you review your own trading records and identify occasions in which you *did* place your stops or time your entries effectively. This enables you to reflect on these positive instances and develop solution patterns out of the things you're already doing correctly.

Solution-focused change works because it builds on a person's existing strengths, affirming competence and finding answers to problems that are valid for each individual. The key is to look for exceptions to problem patterns: specific instances of trading when you *don't* make the mistakes that trouble you, and when you *do* trade well. These exceptions become the foundation of solutions that can be rehearsed over time, in mind and in one's trading practice.

The simplest journal I recommend new traders keep is simply to identify--each day--one thing that you did wrong that you'd like to correct the next day and one thing that you did right that you'd like to build upon tomorrow. The reason for this journal format is that it balances the problem emphasis with a solution focus. If you only improve your deficits, at best you'll go from deficient to average. The elite performers in any field identify their strengths, build on those, and find ways to compensate for and work around weaknesses.

In some measure, in some ways, you're *already* the trader you want to be. Once you realize that, it's only a matter of crystallizing your strengths, turning them into habits, and building your consistency. Greatness is more than the relative absence of problems; it's the purposeful cultivation of one's most distinctive capabilities.