Lesson 7: High Performance Techniques In Trading

Trading is highly competitive. Few traders make money consistently. 

A minority of the traders make much of the money due to the zero-sum nature of the game. To succeed, we must learn some high-performance techniques that can give us an edge in the markets. 

Research has proven that great trading is a combination of talent and high performance techniques. 

In this lesson, we will look at some psychology techniques that we can use to enhance our trading performance. 

Consistency in a random market requires a shift in mindset and behavior. 

Habit 1 – Deliberate practice of skills 

Have you ever heard of the 10,000 hour rule? Malcolm Gladwell rose to fame after he published the book outliers. In the book, he argues that you need to put in 10,000 hours of practice to attain mastery in any field. 

The style of practice, however, matters. If you work without deliberate practice, it’s hard to perfect your skills or perform at an elite level. 

Deliberate practice refers to a particular type of practice that is purposeful and systematic. 

The best way to get better at trading is through deliberate practice. It means practicing to get better: 

We are working on activities recommended by experts to develop specific abilities. 

Identifying weaknesses and working to correct them. 

Intentionally pushing yourself out of your comfort zone.

The essence of deliberate practice is to create a learning loop. A learning loop has three primary stages. 

Attempted performance – At this point, our concern is trying to perform a specific task. We can think of a trader who trades a particular setup on a simulation account. 

Feedback – This involves the use of feedback to try and improve our performance. Our success can help us know what we are good at, while our failures can direct us on what we need to improve our trading. 

Practice – This means that we get back to the playing field and perfect our trading. 

Deliberate practice in trading 

The following key points can help us assess our performance. 

Pattern Recognition 

Under pattern recognition, we can think of the following indicators to guide us:  Trend Identification Identify the direction of the trend. 

 Pattern Recognition – monitor price action and pattern formation  Setup Recognition – detect high probable setups in your trading system. Risk Management 

Risk Analysis – Generate Low-risk Ideas 

Capital Allocation – Think about how much to risk on every trade setup. 

Trading management – Mentally rehearse what you will do in different situations. 

Habit 2- Breathing Techniques 

The elite performance takes place in a state of flow. To attain states of flow, we need to rehearse in our minds these mental states. 

Due to the mind-body connection, humans have the power to alter their states of mind by changing their bodies. Breathing is one of the methods commonly used

Eastern Traditions and cultures invented this method. Science has also proven the benefits of breathing. 

Deep breathing can help manage stress. 

Practice Diaphragmatic Breathing 

Sit upright in a chair, or lie down on the floor with your knees bent. Close your eyes and visualize your shoulders melting away from your ears. 

Place the hand that you write with beneath your navel and the other hand just above your navel. 

Breathe in deeply through your nose into your hand just below your navel. Allow this area to fill like a balloon. Next, feel your rib cage, where your other hand is, expand as the middle portion of the lungs are filled. Finally, fill the upper third of the lungs. 

Exhale slowly, contracting your belly as you breathe out. 

Keep your focus on each inhale and exhale. 

Repeat for five to 10 minutes, and then go about your regular workout. We need to implement it in our lives for it to work. 

Habit 3 – Journaling 

Great traders use feedback to improve performance. 

A Journal can help us organize the feedback we use to improve ourselves as traders. Different types of journals serve other purposes for our trading. 

A psychological journal – This can help us understand our cognitive strengths. Before executing any trade, we can ensure we list down the reasons for the transaction. 

An emotional journal – We can understand our feelings better. 

A trade journal – Before and after shorts of our trade setups can help us map out which trade setup work and fail.