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.



SSK said...

Hello Brett, Thanks for the recomendation. I am going to add to my Breif Therapy Snippets to reflect just that, that being, (along with the various catagories that have already been archived from the last month),the creation of a new video project (maybe once a week, at the end of each week), highlighting the accuracy of the daily morning video reviews that I produce each morning before the open, where I talk about market structure, and general support and resistance and directional bias, during the 1st video each day in the "A Great Day Trading" video series. Just reviewing and commenting on how well that discussion proved to be after the fact,(it is fairly accurate) can only reinforce that very important foundational point that is so critical to trading,(understanding market structure),therefore reminding myself of the progress that I am making, helping me to keep a positive additude even though execution mistakes may have been made during the previous day, and not let those get me down, or stay focused on them to much. I notice in my review of my own work via video, that fustration in trading due to poor execution,(for a variety of reasons) blocks the mind from remembering the things that I spoke about earlier in the introductory video before the market opened,(on the same day, sometimes only minutes later!) that were dead on, that should have allowed me to focus better, but getting fustrated due to the poor exectution on just a couple of trades prevented me from exectuting correctly going foward,(like a snowball rolling down a hill, the result: I then miss the bigger picture even though I spoke about, and understood the market's structure correctly. In other words, to much focus on the negative. The funny thing with me, (and it is probably related to focusing on my weak points to much) is even though I may make 5, 10, 15 points per contract or more during any particular day, I still feel the pressure of poor execution because of the trades that didnt work and because of the mistakes that I did make, forgetting about the good trades, and that can absolutly push you into hasty trading. Probably to perfectionistic. Can you sometime write about your struggles with perfectionism? In the past you mentioned that you guard agianst those though patterns, so it seems that it is on your mind, it would be insightful to hear your personal struggles with such, and your succsess and with overcoming it, and guarding agianst it. Thanks agian for your inspiration. Best, SSK

SSK said...

As a follow up to the previous comment, in my video journal I have a column that I have for a "Breif therapy goal". I havent been setting one over the last couple of months, but your suggestion is the perfect fit. Instead of having just on goal that is based on a weakness,(I used to set one and work on it for weeks at a time, many times lead to fustration (and some things are hard to figure out a way to grade them objectivly), I can simplify it, by doing just what you said, keeping it simple, and adjusting it daily, keeping both the positive and negative in balance. Excellent suggestion, it is going into effect tomorrow morning, and the positive comment will be first in line! Thank you! SSK

Frank Aguirre's Wisdom said...

@solution-focus change. I'm not promoting scriptures, but there IS a story about the Man-God out walking on the water and one of the disciples tried it. So long as the disciple kept his eyes on his master, he floated. When he took his eyes off of him and looked at the water, he sank. (I just thought there was a connection.)
Frank Aguirre, San Antonio

adan said...

hands down, one of the most balanced, literally, approaches i've come across -

that it appeals to me is nice too :-)

Chris Smith said...

Hey Brett, always enjoy your thoughtful analysis. For a new trader, do you have a spreadsheet-type journal you recommend? I'd like to capture all the best practices / data, both objective in trade entries & exits, and subjective journal thoughts.


Brett Steenbarger, Ph.D. said...

Thanks for the useful feedback! Chris, much of the info that I like to include in a journal is described in my blog posts on the topic and especially in the trader performance book. I think it's valuable to include journal insights about markets, performance, and self.