How do we make Our Trading Decisions?

You may wonder why you would need to understand how you make any of your decisions in trading. In fact what you really need to know and understand is how you make any of your decisions in life. Why? Quite simply you’re obviously not making the right trading decisions or you wouldn’t be here.

 

Mirror

What you may not yet realise is that trading the market, any market is like looking into a big mirror.

A big mirror that multiplies whatever it see’s. If you are making wrong decisions in life, then the market mirror will reflect that back to you x 10.  

 

You will be making 10 x more bad trading decisions in the market than in your life. You can imagine what this means if you are making countless bad decisions in life…

 

How is this so?

We have already installed in us (most likely by others…another blog) what NLP calls a decision-making strategy. A program if you will that runs on our hard drive otherwise known as our subconscious mind. And unless you are a skilled Psychologist, or you are a Practitioner of NLP and you have changed your decision-making process already, in which case…Why are you here?

Your decision-making strategy will look a little like this…
You will either see, hear or smell something you like. You then recognise that it is familiar. Your subconscious mind will then kindly give you a thought or a memory about how that thing makes you feel good. So you then go and purchase it…

 

The Bakery

Ever walked past a bakery with absolutely no intention of buying anything, I mean you are not even hungry? Me too. You walk right on by and completely ignore the smells, right? No…me neither. This is what happens instead.
Sniff…Sniff,Sniff
Mind – “Mmmm, that smells real good”
Subconscious Mind – Here have a great memory from the last time you ate a doughnut (my weakness, but you can substitute that with yours). Remember how good it felt. Are you getting some idea of that good feeling now? Yeah, there it is. Wow, that feels good.
Mind – “I want to feel that good, now.”
And before you realise what had happened, I’m walking down the road with a doughnut in my hand and jam running down my face. Happened to me quite often until I understood the reason and I changed the process.

 

Trading

So how this affects your trading is basically this. You have a new trading strategy or system. “Same Same” as we say in Thailand. From here on in, for ease I will just use the term strategy. As sold by multiple companies out there in the world wide web. So, you have bought a nice new shiny readymade strategy. You’ve been told how wonderful it is and the success the companies traders have been having with it. You have even watched a few lessons, maybe not entirely sure what you are doing, but he made it sound so easy. You are going to have a bash, you will give it a go…

 

Decision-making Strategy

The strategy is very simple in terms of your decision making.
                                                
See the signal – recognise that it is familiar – feel good about it – take action.

Easy, “no problem” you say to yourself “I’m going to be richer than Donald Trump this time next month.” You sit down at your terminal with your eyes peeled waiting for your first signal.

It takes a day and a half. By this time, you are already bored, stupid strategy, you are now in the market for a new strategy. No that’s a different story, but it does happen. May have been me with my very first strategy, who knows. Any way …

You get your first signal – you even recognise that it is familiar (because you have your checklist in front of you) – you feel good about it – you take action, you place the trade – your first trade with your new shiny strategy, you’ve waited a day and a half for the signal and within fifteen minutes it loses…

 

Losing Faith

Some new traders might stop right there, “what sort of stupid strategy is this, I paid a fortune to wait 3 days (we always exaggerate when angry) only to lose in 5 mins. The guys an idiot” You get the idea, this trader will stop here and he or she, will be back on-line looking for the next best strategy. Maybe you had a better teacher, or you had more trust for your guru (saves doing he/she). Maybe said guru warned you, that you would probably lose the first trade. Or even the first few trades. So, you carry on…

You see your signal – you recognise that it is familiar – you feel a little less good about it – but you still took action – and, it loses. You might still go back in for more, you may still take the third or fourth trades. At some point not too far into this journey you will have lost faith…

 

Adding a step

Subconsciously this presents itself in your decision-making strategy, you add an extra step. You didn’t mean to, you didn’t know you had. And obviously it wasn’t a good one or I wouldn’t be writing about it here. Which means that your new process now looks like this.

You see your signal – you recognise that it is familiar – you then tell yourself what might go wrong if you take it – you then visualise that scenario – which makes you feel bad about it – so you don’t take action – and you don’t take the trade – which of course goes onto win. Which you may or may not know about, depends if you looked or not…

 

 

 New Strategy please

From the previous situation one of two things will likely have happened.
1) The bad feeling would have immediately put you off ever using that strategy again, so you never saw the winner or ever will. Which of course now means that you are back on the web looking for the next best new shiny strategy.
Or
2) At this point or when it happens again. Of course, some of you will have a few more attempts before you stop. But stop you will because you don’t understand that you have installed that extra step into your subconscious decision-making strategy. It may even be this scenario that causes you to stop.

You take the trade and it loses, you take the next trade and it loses. So you don’t take the next trade and it wins, you take the trade and it loses, you don’t take the next trade and it wins…Are you kidding me!

“How can that be coincidence, the broker is going after my money, he knows when I’m in the market. The markets rigged. Stupid Strategy!”
And now you’re in the market for a new strategy…

 

The Extra Step

All because of that extra step, that you had no idea you added. Guaranteed you get that bad feeling that comes with that extra step, that’s what makes you stop using that strategy. From here you will either tweak the strategy or go buy a new one. This is also known as Self-Sabotage because it is a repeatable mistake. You will keep making the same mistake. That bad feeling. That is why we must be Emotionless when we trade. Both the Negative Emotions and the Positive Emotions are bad for your trading. So how do you keep the emotion out of trading, so that you can become an Elite Trader? How do you stop that bad feeling from creeping into your decision-making strategy?…

 

Decisions

Awareness is always the first step. Once you are aware that you have a decision-making strategy and you also understand that you have one for all your different decisions in life and not just in trading. You can change those strategies to suit the situations. This is a part of what we teach at https://www.specialfxacademy.com. This then leads on to you making the correct decisions in life, which in turn is reflected by the market mirror x10. With our teachings you will be making 10x more correct decisions in the market. If you think that sounds good click above.

 

Long Cut

There is of course something that you can do now to start breaking that cycle you are probably in. This is what my wife calls “the long cut”. And I will explain how you do that just after a quick word from my sponsor…me… but if you want the shortcut come speak to us at https://www.specialfxacademy.com and let’s see if we can work together. Our mission is to train as many traders as we can to the Elite Level, but not everyone is suited. It takes commitment and hard work, this is not the easy option. However, it is the only option for success.

 

Testing

If you have a solid, detailed, written Trading Plan, with rules that a child could follow. You will also have a section on the testing of your current strategies in use. This will be a mixture of back and forward testing. The reason for testing and documenting it are threefold;

1) It will give you the confidence in your strategy to trade as per your Trading Plan.
2) It will give you guidance on the future predicted results of your strategy, and will also be used to monitor the strategy so you know when it no longer works…

 

Efficiency

And 3) Your testing will also allow you to trade your strategy to its maximum potential with the most efficiency. This means that you can correctly position size your trades to meet your objectives, to get the results you require from your trading. I will cover this more in a future blog. For now, lets get back to our…

lose – lose – no trade (win) – lose – no trade (win) – lose – lose

Which is a very likely scenario in many strategies if not all of them. And the law of the land says you will most probably start with the losses when you begin live trading a new strategy. This time though you have tested the strategy, and made a journal of the results. You know that it loses frequently, however the wins are big. So, you are happy to trade this strategy as you are a SFXA Elite Trader and your psychology is spot on.

You are confident in your strategy and trading plan, which of course is perfectly written as you had a great coach. Being an Elite Trader, you treat every trade the same with no emotion, regardless of the result of the previous trade.

You see your signal – you recognise it is familiar – you feel good about it – you take massive action and place every trade. Here are the results of those very same trades that previously annoyed you and made you quit the strategy.

L 1% – L 1% – W 9% – L 1% – W 12% – L 1% – L 1%
5 losses @ 5%, 2 wins @ 21%  =16% profit

Not bad for a Stupid Strategy…

 

If you are struggling to learn to trade consistently by yourself, then I would suggest taking a look at our Trading Room. Here you will gain access to two coaches, Andres – Director of Trading and myself Director of Trading Psychology. Where else can you learn and be coached by a Trading coach and a Trading Psychology Coach, while making pips?

 

To Your Consistently Profitable Trading

Callum

 

P.S. What did you think of this Lesson? Please share it with us in the comments below!

 


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Callum McLean

Co-Founder and Trading Psychologist at Special FX Academy
Trading Psychology Coach and Certified NLP Coach. It is my belief that trading is 99% Psychological. And it is by understanding and improving your psychology, that you can be a successful trader. Success is a formula that everyone can and should learn.
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