Thursday, January 08, 2009

The Single Most Powerful Step Toward Becoming Solution Focused in Trading

My recent post offered an overview of a solution-focused approach to working on one's trading. Many times, however, traders have difficulty figuring out how to get started with a solution-focused approach. Here's an exercise and a simple framework that can be quite useful:

Step One: On one side of a sheet of paper, write down all the things you most often do wrong as a trader--all your worst trading behaviors. It might help you to think about your most difficult periods of trading performance in the past year and then write down all your worst tendencies that contributed to those poor trading periods.

Step Two: On the other side of the paper, write down all your best practices as a trader: all the things you do best and that work for you. It might help you to think about your most successful periods of trading in the past year and then write down all your strengths and best trading behaviors.

How long is your problem list? How long did it take you to think of the entries and write them down? How long is your list of best practices? How long did it take for you to come up with them?

If you're like many traders, you're more in touch with your problem behaviors than your best practices. Indeed, many traders are stumped when asked to clearly identify their strengths.

If it is much harder for you to identify best practices than to identify problem patterns, then you know that you are problem-focused, not solution-focused. If you were a mouse, you'd only see the holes in the Swiss cheese and you'd never get a bite. It's our cheese, not our holes that nourish us as traders.

The single thing you can do to begin a solution focus is to identify best practices after each of your successful trading days. These best practices may be grouped by category, such as:

Best Practices for Generating Trading Ideas
Best Practices for Executing Trade Ideas
Best Practices for Risk Management
Best Practices for Managing Positions
Best Practices for Exiting Positions, etc.

The key is to stay on the lookout for what works for you. Every successful trading day should contribute to your best practices catalog. Once you generate a list of best practices, each of these becomes an ideal for you to live up to. Indeed, every best practice can become a concrete trading goal that keeps you grounded in your strengths. After all, you can't live up to your best if you're not aware of what you do well.

Best practices become goals; goals become routines: The great individual turns excellence into habit. This is key to successful self-coaching.