Trading – the art of managing the imperfection of human decision and action in an environment of uncertainty.
Damn, I love this game! 🙂
Trading – the art of managing the imperfection of human decision and action in an environment of uncertainty.
Damn, I love this game! 🙂
This is not for those who trade longer timeframes. If you trade the 15 minute chart or higher then you should NOT be aiming for constant screen watching all day. Set alarms to monitor price on completion of each trading timeframe candle. And price alerts to bring your attention back to the charts at key levels.
If you trade the 5 minute chart, perhaps you'll want a blend of the two. Alerts when price is well clear of potential setup areas. Screen watching only when there is potential for trade opportunity.
But below 5 minutes, you'll likely want to spend considerable time watching the price movement.
And for you, it's important that you develop a plan to achieve peak-performance levels of focus.
Here are my thoughts:
Let's start by reviewing one of the key ideas in the article on discipline.
Read it here if you missed it: http://yourtradingcoach.com/trader/how-can-i-get-more-discipline/
In that article, I suggested that you can't "get more discipline". Discipline is actually an outcome. And it comes about through effective HABITS and STATE MANAGEMENT.
The same applies when we think about focus.
Focus is not something you can just get more of. Again, it's an outcome. And it comes about through HABITS and STATE MANAGEMENT.
We aim for habitual use of processes in our pre-session, during session and post-session routines, in order to establish a focused state. And to return quickly to the focused state if our mind should start to wander.
And we aim to place our body, mind and soul in as much of a peak-performance state as we can, in order to best maintain effective levels of presence, awareness and FOCUS.
So let's split this article into two parts, turning the idea of "focus" into a daily habit, and then ensuring effective state management.
Here's my plan:
1. The Power of Intention
There is nothing I've found more powerful in kick-starting my daily habit and ensuring disciplined focus than the power of intention.
This is a documented part of my pre-session routine.
It is simply a verbal statement of intent that "Today I WILL focus on the charts. I will not allow myself to open my browser for any non-trading purpose".
That is obviously set up for my most common distracter. "I'll just have a quick look at email and social media."
Adjust the statement to suit your own needs. But be sure to give it a try.
I can confirm through having monitored this as part of my review process, that days which begin with a verbal statement of intent are typically more focused than days when I did not make the statement of intent.
2. My Focus Statement
This is used during the session, whenever I have caught my attention wandering.
Here it is via a recent share on social media:
3. Regular Checks
Every 30 minutes I check my personal state. This includes an assessment on how effective I was in maintaining focus.
If particularly good or bad, I'll jot down some notes.
These then feed into the post-session review.
And if poorly focused, it's back to the statement of intent and the focus statement (above).
4. The Focus Alarm
I don't always use a focus alarm. I find if used continuously that it tends to just disappear into the "background" after a while.
But from time to time, in particular if slightly fatigued, it has helped.
It's simply an alarm that goes off on the close of EVERY trading timeframe candle. It sounds a bit extreme. But it works. You can of course set it for longer if you prefer. Or shorter.
But it acts as a "wake up" to not only shock me back into focus if I've slipped away again, but also allowing me to "update" my market analysis with this new candle information.
I use SnapTimer, but there are dozens online if you don't like it.
5. Post-Session Review
The 30 minute notes on your ability to maintain focus are pointless if you don't review them.
So post-session… review them.
And then, if you were not particularly effective, aim to identify why and find a way to improve tomorrow.
1. Eliminate Distraction
Your mind cannot be focused if it's surrounded by multiple temptations or distractions.
The mind is NOT a multi-tasker.
Remove all distractions – social media, internet, phones, pets, kids, and whatever else acts to take your attention away from the charts.
For web browsers, you can find apps which block access to them during preset times each day. Keep one browser available though (not the one you usually use for surfing). If your platform goes down or you get other tech issues, you're going to want some way of getting online quickly.
2. Adequate Rest
Set a minimum standard for rest. And stick to it.
See here for mine – http://yourtradingcoach.com/trader/trader-fatigue-management/
3. Adequate Hydration
There's a water bottle just off to my right. Always accessible.
Get one for your trading room if you don't have one.
4. Physical Health
This kind of goes without saying. If you struggle with focus, exercise better and eat better. Simple!
You will notice improvement in all areas of your life.
5. Relaxation processes
I have regular breathing routines from back in my Tai Chi & Chi Gung days.
If you don't, Google search it.
Find some exercises to relax the mind, body and soul.
Coffee pre-session. To be honest I'm not sure on the science of this one. It is effective for me, given the night hours I trade. But not too much. One a half-hour before trading seems to help me. Give it a try.
I have a glucose lolly pre-session. And then a second during the session if I feel a bit flat. See here – http://www.nytimes.com/2011/08/21/magazine/do-you-suffer-from-decision-fatigue.html?pagewanted=all
I've heard chocolate helps. But maybe I'm making that one up because, you know, chocolate! 🙂
I've heard blueberries are good for a sharp mind. Give that a try if you're not a fan of chocolate. (Send me your chocolate!)
Chewing gum, while not exactly a stimulant, seems to work well in dissipating any nervous energy that can act as a distraction.
7. Regular Breaks
Always aim to spend a few minutes every half hour AWAY FROM THE DESK.
Get up. Stretch. Go for a walk. Whatever you need.
Just get away from the charts to reset your mind.
8. Regular Exercise
Consider incorporating this into your breaks.
Nothing gives you a "wake up" quite as effectively as a short, sharp burst of exercise.
9. Background Music
Nothing with lyrics. EVER.
But experiment with background ambient music, binaural beats or isochronous tones. Or whatever works the best for you.
It's a process of trial and error. Add this to your post-session review until you find a number of preferred solutions.
10. Standing Desks
I don't have one right now due to the current layout of my trading room. But I've used this in the past to great effect.
Seriously, it works incredibly well.
Raise your desk. And stand back a bit, out of arms reach of the keyboard and mouse.
Step forward ONLY when it's trade time.
It's just you and the charts. Absolutely NO WAY to click on that web browser, even if you wanted to.
If Nothing Else Works
I've yet to see a trader try this but it looks like it has potential.
– – –
Well that just about wraps it up.
What have I missed?
If you have any tips or techniques which you've found effective for improving or maintaining focus, let us know in the blog post comments.
Best of luck,
The following was a social media post that I sent out just before my trading session on the 6th of February.
It was my first session following a two week holiday… and I was more than keen to get back into the markets.
Click on the image or this link here if you wish to read the article – Patience is a Key Component of your Edge.
It was a simple reminder to myself that:
In other words… knowing that I'm susceptible to emotional, impulsive trading when I first come back from a break, I reminded myself to slow down. And wait till I was truly in sync with the market.
As I write this it's now the 21st of February. It's the first trading day following a long weekend. I'm keen to trade. I'll be giving myself the same reminder pre-session.
And again next week. I'll be admitted to hospital next Tuesday for some very minor day surgery (nothing to worry about). But I'll likely need a day or two off trading as I recover. Again, I'll be giving myself this same reminder.
Slow down. And wait till I'm truly in sync with the market.
This is not all I do.
There is a simple "hack" which I've used for a few years now which provides exceptional help in overcoming my impulsive desire to trade.
I've thought about sharing it a few times, but to be honest it seems so obvious that I thought it would be a stupid topic for an article. My stats clearly show that readers prefer charts… and this is not a chart.
But it's so important. And such a great help. And given that I'll be applying the hack again today… I figure you should get it too.
This will be of most relevance to short timeframe day traders; those of us who "screen watch". But the general concept can be adapted for use by longer timeframe traders as well. We'll talk about that later.
Interestingly, there has been some exceptional discussion on this topic in other blogs in recent weeks. I'm not going to duplicate their advice. It's great work and you should go directly to their blogs to read their suggestions and solutions.
Visualisation, meditation, mindfulness, and all the other methods discussed… they're very important and a key part of your solution. I particularly LOVE the technique provided by Dr Steenbarger, in the SMB Training link. I'll make you click to get that one! (Ha ha).
But I was surprised to see that my little impulsivity hack was not presented.
So here we go.
What is the solution? How do I reduce the likelihood of emotional, impulsive reaction to price movement?
I create a physical barrier between my desire to trade and my ability to execute.
In other words… I step back about a metre and conduct all analysis out of reach of the keyboard and mouse.
I know… right!
No, seriously. Work with me here.
The key problem is NOT our impulsive desire to trade. It's the fact that we react to that desire by clicking the mouse and entering.
The solution is to put a barrier in place. Something that forces a break between your desire to trade and your ability to enter.
It does not need to be a massive barrier. This solution is about as small a barrier as we can get. It's simply space. And only one metre. But it's enough.
Discipline and patience are not just a function of willpower. You can create physical barriers to limit impulsive trading.
A physical barrier between your desire to trade and your ability to execute.
Just a small barrier. But just enough to have you pause and reassess.
Longer timeframe traders… clearly stepping back one metre is not likely to help you. After all, you've got a lot of time to make decisions anyway. But the same concept applies – adjust your environment to provide a barrier between decision and execution. One possible solution – conduct your analysis and trade decisions on a separate platform that does not allow execution. Once trade decisions are made and written down, open up your broker's execution platform and reassess the quality of your decisions. Only enter if they're still A+ ideas.
I'm sure you can find other solutions that better suit your particular trading setup.
The key concept applies though, regardless of who we are and how we trade – create a physical barrier between your desire to trade and your ability to execute.
It's not a full solution. See the links posted earlier for some other key parts in managing impulsivity. But it's a simple "hack" that I've found to be exceptionally effective.
I'll be using it tonight, as I trade the first session back after a long-weekend.
I hope you find the idea effective as well.
Over the years I've traded with various different forms of background music or noise, with the aim of finding that right combination that allows me to work with a positive and confident attitude and laser-like focus.
Not surprisingly, I guess, what works best tends to vary from time to time with my prevailing mood.
I've tried everything…
But more often than not over the last year my default has been ambient music.
You can find some great music via online streaming radio such as provided here: http://www.internet-radio.com/stations/ambient/. My usual preference is for AmbientRadio.org (the first on the list) and Chilltrax (about half way down the list).
But I continue to experiment.
Right now I'm also liking white noise. Try this for example: https://www.youtube.com/watch?v=bNqERBWaJeM
I'll update this page if I ever find anything new.
In the meantime, I'd love to hear what you play in the background while trading. Feel free to comment below if you have any favourites that you use to provide a positive and focused mindset.
PS. There were of course some failures as well. In particular I find that background news and TV are just too distracting. They will likely never play a part in my trading room again.
For the last year or so my trading computer has been on a desk just to the left of my work computer.
This has been fine except during quiet periods of price movement, when I've often found myself tempted by the work computer. All I have to do is turn to the right and it's within reach.
"I'll just check emails or facebook. It'll only take a second!"
Usually this is fine but occasionally I'll become so absorbed in whatever I'm looking at that I don't realise five or more minutes has passed without watching price.
The good news is that there was a simple fix, which has allowed me to maintain focus on price. I'll get to the solution just below. But let's talk in general terms first, because the solution works for many other causes of loss of focus.
How do you maintain optimal focus in a world full of distractions?
The internet will provide many exercises on willpower and mindfulness, which should help with any focus issues you may have. These are great. But they're not the first step.
The first step is not to work on your focus. The solution is much simpler.
No… not the naughty chair. This is not a punishment.
Sometimes you just need to separate yourself from the screen.
Get away from the computer. Get some fresh air. Relax and refresh the mind and come back to start again.
Like a reboot for the trader!
My question is, "how does one stay focused while watching charts waiting for trade setups?"
Lance, my mind wanders while staring at charts waiting for setups. If I could take to the bank the number of trades I missed while NOT paying attention to the charts, I would be making a healthy income.
I've missed many trades wandering off. We all hear often about trader focus; but how does one achieve this??
Here's something for the short timeframe swing traders and scalpers to try, in an attempt to improve your ability to sustain your focus and attention and to ensure that you do not miss critical information at the most important times within your trading routine.
Consider where your attention needs to be during key time segments (eg. price in setup area, entry and early trade management, ongoing trade management) and then set up standard scan patterns.
This concept comes from my aviation background. The primary means of maintaining an aircraft in a safe flight attitude is through being able to see the horizon outside the aircraft. At night or in cloud the pilot loses reference to the horizon, so needs to make use of information available through their flight instruments. Failure to do so can result in loss of control, sometimes within seconds.
Pilots are taught to immediately start scanning the instruments upon loss of external visual reference.
While there are several scanning methods available, one of the most common is a Selective Radial Scan, where attention is primarily maintained on the Attitude Indicator, and branches out to one supporting instrument at a time, returning always to the Attitude Indicator before scanning elsewhere. This reduces the chance of fixation upon any of the less important secondary instruments, maintaining greater awareness and ensuring faster response to unexpected changes in attitude.
I once heard a statement by Rebecca Fine of www.scienceofgettingrich.net that says something along the lines of “If what you’re thinking about isn’t something that you want to have happen in the next three minutes… get rid of the thought and think something else.”
While that’s a great way to live your whole life, and I certainly try to do so, it equally applies to the process of trading, specifically ensuring that we maintain focus during the conduct of our analysis.
Maintaining focus can be difficult. Not only will you face distractions from external sources, such as the phone ringing right during a prime setup, or your partner asking for a lightbulb to be changed, or your children asking for help with their homework, but you also face internal distractions from your negative fear-based trading mindset. These internal distractions may be less obvious to the novice trader, but the results can be devastating for your profitability.
If you have not yet mastered your negative fear-based trading psychology, then you are going to face never ending distractions that divert your focus from the job at hand – consistent implementation of your trading plan.
Regardless of how these fears manifest within your trading – complacency, boredom, doubt, procrastination, denial – they will lead only to inconsistent and unprofessional application of your trading plan. And that cannot lead to long term consistent profits.
How do we deal with this negative fear-based trading psychology? Well, that subject cannot be addressed in one article. I’m currently working on a complete home-study program on the mastery of trading psychology, which will provide you with the tools, strategies and techniques for overcoming these issues.
However in the meantime this statement from Ms Fine provides you with a really simple tool to add to your trading toolkit, to ensure you maintain focus during your analysis despite any internal or external distractions.
The process is similar for both long term traders and short term traders. But let’s talk short term first, because that’s primarily what I do.
As a day trader, your success comes from consistent application of your trading plan. Success comes from conducting analysis on a regular basis throughout the trading session, either on the close of each candle or on a price-alert as price reaches a certain preset level, and then acting appropriately to enter, manage or exit your trades.
What do you need to do to ensure that your focus remains on the process of trading?
Here’s what I do:
This works regardless of timeframe. If I was trading off one hour charts, I’d set an alarm to activate just prior to the close of each one hour candle. If I was trading off one minute charts, I’d still set an alarm to go off just before the close of each one minute candle. If I was just waiting for a price setup at a particular price level, and had no intentions of trading until price hit that level, then I’d just set an alarm for price hitting that target.
Setting an alarm for timeframes of 15 minutes upwards is certainly a great idea, as you won’t necessarily be sitting watching the screen the whole time in-between candles. However, you might ask whether it’s really necessary for very short timeframes, such as one minute charts. The fact is though, that it is necessary, and it does work. It is amazing how often I find my mind wandering elsewhere. More often than not, it’s thinking about something unrelated to my trading plan. The alarm interrupts this thought pattern, and allows a return of thought and focus to what’s important.
Try it, and if you find yourself suddenly wondering what the MACD shows, and it’s not part of your plan, discard that thought – it’s irrelevant to this trade. If you find yourself suddenly thinking that you need to win this next trade to get back to breakeven, discard that thought – it’s irrelevant to this trade. If you find yourself wondering where you should go next holidays, discard the thought. Once again, it’s irrelevant. Interrupt any unwanted thoughts, and think something else that will help you trade your plan in a consistent manner.
Oh, and so that you don’t burn out through having an alarm go off every minute for an eight hour trading session, let’s add a step 3:
For longer term traders, let’s say someone trading off daily charts, the problems are the same. In your case, you have a process that needs to be followed to come up with your decisions to enter a trade, exit a trade, or modify target or stop levels.
In this case, you still need to implement step one, documented actionable steps that allow for consistent application of your plan. Consider something like a checklist, or flowchart.
You can probably dispense with the alarms, as you only need to complete the process once. However for longer term traders, I’d recommend including statements within your documented process to remind you to check your thoughts, and return them to the process of trading.
Perhaps prefix every step with a documented reminder such as, “I am a professional trader, and a professional trader trades their plan in a consistent manner”. Then, the act of commencing each step of your nightly analysis, will serve as a regular interrupt to unwanted thoughts, and a return of your focus to the job at hand.
This way, there’s no need to be going and checking other indicators for further confirmation, when it’s not part of your plan. There’s no need to be checking other news sources for further justification of your decisions, when it’s not part of your plan. There’s no need to be emailing or phoning your friends to seek their thoughts on a particular stock or chart, when it’s not part of your documented process. These are actions of people who have lost focus, and whose trading destiny is being led by their fear and greed.
As a professional trader, you simply follow your steps. And use your alarms, or documented checklist steps, to interrupt any unwanted thoughts, and return your focus to the business of trading.
So, if you don’t already have a checklist or flowchart set up for all actions that must be carried out during your analysis, then create one. And place in it reminders to monitor your thoughts, and reject anything that is unrelated to the current task at hand.
And if you day trade, set up an alarm, either price based if you simply wait for price to hit certain levels before making trading decisions, or a countdown timer if your decisions are time-based. Then reject any thoughts that are unrelated to the process of trading. And follow your plan with consistency.
Wishing you happy, and focused, trading,