Practice Makes Perfect Trading Performance
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Why it’s so important to invest your time in practicing your trading performance
Before a surgeon performs surgery, he or she has gone through countless hours of studying, simulations, and practice. Before they even see a live patient, they know pretty much exactly what they’re going to be dealing with. The live surgery is the culmination of exhaustive practice leading to living surgery.
The same goes for a lawyer rehearsing their presentation to a jury, or a pilot flying on simulators. In just about every field where average trading performance won’t cut it, you need to practice and build your skill before you’re completely ready for the real thing.
Practice Trading, Too
The same is true in trading: you need to practice. We often talk about the similarities between trading and competitive sports in order to drill this idea. When a basketball player isn’t in a game, they are spending most of their time practicing and working on their own or with coaches. Most of the time invested in the pursuit of this career is spent practicing.
Trading is this type of profession. You have to realize it’s not a technical job where you come and simply react to situations in a satisfactory manner. You cannot be average in trading. You have to be perfect and trained for every possible scenario. For perfection, you need to practice.
What is Practice in Trading?
There are a few types of practice and preparation that you should be doing regularly. These include but are not limited to: Pattern recognition, trading problem solving, psychological and mental situations that need awareness and resolution, how to deal with changes in market conditions or behavior, and managing your trading discipline and trading environment.
All these elements should be practiced and perfected your trading performance along the road of your trading career.
How and Where to Practice
Practicing the technical elements of trading and price recognition is simple and can be done via backtesting and reviewing charts and historical data. Today, there are a few simulation products that let you run on real historical market data. You can apply your current trading techniques here and see how well it would work and what you need to change in order to make a more successful plan.
This is key to training your eye and mind in order to quickly recognize and act on patterns. Pattern recognition is an important skill that should be so ingrained in your vision that you spot things without even thinking. It’s also important that you’re able to recognize false patterns so you don’t fall into traps the market sets for you.
The goal of this type of learning is to know when there is an opportunity available so you can capitalize on it quickly. Do this even if you think you’ve mastered your technique. We can bet that during your trading sessions, you could be more efficient.
This is the goal: more efficiency and more profit.
Mental and Psychological Aspects
This component also needs a ton of practice.
A very helpful tool is to maintain an emotional diary while you’re trading. During trading times, write down how you feel while in different situations that the market puts you in. Try to write down your reaction as well and how you interpreted it at the moment.
After the trade or session is over, go back and write down how you remember it. Compare the real-time notes to the reflection notes. If there are differences, find out what the right behavior should have been.
Now you can create an action plan for when these situations happen again. The goal is to have a fast action that will be the most efficient way to deal with the situation.
Plan for the Unexpected
Practice changes in the market that you wouldn’t expect. Dream up every possible scenario and prepare for it. Part of this practice is working out in your action plan diary the action aspect, not the emotional.
You might enter the market because your plan says so but then the market surprises you. In this case, what do you do? Do you hold on, all or nothing, or do you change your plan while in it and take some losses? What is the more efficient course of action?
Work out these ideas and create your action plan to address the unforeseen market swings.
Create an Ideal Trading Environment
This is also something to practice and be open-minded about. For example, if you’re working by yourself or a partner and you have email and Facebook open, be aware whether these things help you or if they distract you. These small variables can have a great impact on your focus and performance.
Certain distractions might not be avoidable but try to practice ways to reduce their impact on your daily work. Keep your trading environment set up to allow you to fully reach your goals with as little interference as possible.
Invest Time and Discipline and Don’t Be Afraid to Ask for Help
If you have the discipline and can dedicate time and attention needed to achieve these ideals, you should be able to figure it all out on your own. If it’s too hard for you, communities and mentors are available to help you through the experience.
Eventually, tailoring all these elements will become instinctual and easier to handle.
It Gets Easier Over Time
If this all feels utopian or overwhelming, remember that it’s always hard to change your routine at first but a few small steps here and there will ultimately lead to big and lasting changes.
You don’t need to immediately try to manage everything laid out here, rather, pick one or two elements and incorporate them into your daily routine.
Practice and drill relentlessly and ultimately you’ll have all the tools to make it as a pro trader.
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