As traders, we want to discover what we do well. Our successes reflect our strengths, and we are most likely to succeed when we draw upon our strengths. An excellent short-term trader, for example, may have strengths in the areas of speed and breadth of mental processing. The ability to look at many markets or stocks and quickly perceive evolving patterns is not something everyone can do well. When we study our successes and figure out how we are making use of our strengths at those times, we become able to define our best practices. Best practices are what we do to increase the odds of our success.
Once we identify a number of best practices, we can unite them and create effective work processes. For instance, an operating room at a hospital will have best practices for staffing, sanitation, prepping of patients, medications before and after surgery, specifics of surgical procedures, recovery, and lengths of stay. The entire series of best practices comprises a process, which ensures the most consistent positive outcomes possible. As new best practices are discovered, these are integrated into existing processes, creating ongoing quality improvement. The entire framework is known as evidence-based medicine.
Process is important to trading because it turns inconsistent, subjective trading into evidence-based trading. When we discover our best practices for identifying opportunity, expressing opportunity as solid risk/reward trades, and managing positions in real time, we can unite these elements of success into a rigorous process. In becoming process based, we find our most consistent profitability. Do we see operating room surgeons going on tilt or over-cutting? Of course not. When we train ourselves in a process framework, doing the right things becomes second nature.
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