More Interviews, Trading Essays

“Focus on the process”. You hear this all the time…. but what does it really mean?

“Essay From Confessions Of A Market Maker co-host AllxDayxRayx”

The Process

“Focus on the process”. You hear this all the time…. but what does it mean? It’s arguably the most important piece of advice in trading and other statistical edge activities. But for the newcomer or the novice, I believe the majority don’t understand the depth of this simple statement. It’s precisely the process a trader must strictly focus on and not the results. In this article I’ll attempt to succinctly put what it means to me and touch on the various elements that make up the “process”. Note that this may be a bit subjective and personal. It’s hard to exactly pin down everything that encompasses the “process”, but I did my best to capture the essence. I broke it down into 3 pieces: love for the craft, Self-review/Strategy, and mental game.

Love of the Craft

First and foremost, the “process” begins with love. Do you love trading? And no, I’m not asking if you love making money. If you’re in trading because you want to make money, stop. The money is a byproduct; the money is how we keep score. At the same time, I’m not saying NOT to be in it for the money either; a paradox if you will. You should be a trader if you LOVE the game- if you have a borderline obsession with trading. Having the visceral love for an activity serves a two-fold purpose in my mind. You’re competing in a game where there are people obsessed with using every waking hour of the day to optimize their trading; this is who you’re competing with. Secondly, having a deep love for the game pushes you through the difficulties which inevitably arise. When failing to initially succeed, are you going to quit? You’re not because you’re fascinated by the market. When you hit a down streak, are you going to quit? You’re not because you love attempting to design strategies that fit current market conditions. The point being, you can’t quit because there’s something inherent that you love about the game. 

This was the realization I’ve stumbled upon myself in my early poker days. I clearly remember several moments throughout my poker career, down moments, where I said to myself maybe I’ve had enough. I’m trying so hard but perhaps I wasn’t where I wanted to be yet, or I was hitting certain setbacks. The next morning or a couple days later it was as if all my anxiety vanished, and I was reinvigorated to see which areas of my game I could improve upon. Simple put, I couldn’t give up if I wanted to; I loved everything about the game of poker and that includes the painful moments- the greatest teachers. I don’t think it’s dramatic to say my connection to the game is spiritual; taught me many lessons that I carry in life, but that’s another topic. I use this example from my early playing days to illustrate to the beginner or novice that trading isn’t going to be all glitz and glamor and potentially quite painful. If you have a strong connection and love for the game, it’s what will keep in you the game. You’ll develop a respect for the game that it deserves, otherwise it’ll humble you. Quitting will not be an option because it’s who you are. Having a love for the game is to not be attached to the results. You trade because you love scrolling through charts looking for potential plays. You trade because you love the challenge. You DON’T trade for the results. You DONT trade because you want to get rich. Attaching yourself to a specific outcome leaves you vulnerable emotionally and that’s something we can’t afford in trading. The less I started focusing on results, the better they’ve become. Sure, having positive results brings a nice dopamine hit, but the real pleasure is in the journey and road traveled, not the destination. Work on your nonattachment. 

Self-Review & Strategy

I want to start out the section on self-review & strategy with a note on accountability. In trading and as in other gambling activities and perhaps life, it’s easy to blame external factors for our lack of success. Sometimes it may even be true. Worrying about the external factors is quite literally a waste of mental capital. We focus on what we could do better-if anything- and we move on. It’s never the markets fault! Ingrain that in your head. Blaming your results or lack thereof on the market is a loser’s mentality. You’re passing the blame off yourself. We’re the one whose executing; Its always on us. Part of the process is taking accountability for our execution. And it needs to be done strictly. I can’t emphasis this enough. We and we only are responsible for our PnL. You ever hear a professional sports player or coach blame the other team for their loss? -ok there may be some rare examples. But most of the time they put the blame on their shoulders and say they need to get better. Play like a champion!

Another thing worth noting is we’re in a game of probabilities. So you could actually be trading fine, but still lose. And vice versa of course. I believe this is one of the most important parts of the “process”. Your self-evaluation; your trade review. This is where you see if you have an edge or not. And this is another word that gets thrown around a lot that I believe a lot don’t truly understand it. An edge means you know for CERTAIN a strategy works- or as close to certain as you can get. Not that it’s worked for you a few times, not that its work for you once and you hit a home run. I’m talking about having a concrete sample size and history of a strategy working. When you know you have an edge you can shrug the losses off; you know the strategy will work in the long run. Knowing you have an edge helps temper emotions because you have confidence in the system. For new or novice traders this is part of the process that may take a while. It takes a while to know if you have an edge or not if your manually tracking your trades as its going to take a while to develop a decent sample size- why back testing is very valuable in my opinion. Starting off this can be frustrating and difficult work. Lets hope you love the game!

Simplify your trading. Trading doesn’t need to be complex. The best traders I’ve spoken too, their trading methodology and strategies are quite simple. When designing a system for yourself, make it understandable and clear to yourself. I think its hard for most- it was for myself- to believe that a simple strategy can reap money from the market. “Making money from the market is hard”, “95% of traders fail”. While these statements are true, a simple strategy that makes money lives in conjunction- my opinion is most people’s emotional interference is the issue. This principle appears to be universal, applying to nearly every subject. If your strategy is complex and hard to understand, is it actually good? Maybe, but it has been said that the greatest minds are able to take complex subjects and break it down in a digestible manner. I think the same can be applied to trading.

Mental Game 

Honing one’s inner confidence and listening to one’s inner voice I believe is a huge part of the process. It’s truly great to have a mentor, teacher or learn from various individuals and their resources provided, especially in the onset of your journey. Just as a child with his parents, you must leave the nest and form your own opinions. And these opinions can be molded by your teachers, but it’ll be personalized to your uniqueness. Knowledge of self- our strengths and weaknesses- is what will maximize your potential as a trader. This is a game within us. It’s not you vs. the traders on social media. It’s you vs. you, with you being the only person standing in your way. Modern society is a very noisy world. The one who can silence their mind and ignore the ever-growing distractions that are present will succeed. There are only a few things you need to focus on for your trading, yet there are millions of different indicators, charts and news headlines vying for your attention. The key is finding what is truly important to the strategies you’re executing. 

I think a lot of what I discussed in this article can fall under the umbrella of “mental game”; all these topics are intertwined really. Having an elite mindset is what all the top performers have. There are many resources devoted to this topic and the pure scope of its depth isn’t appropriate for this article. I will leave you with two resources that personally have had the most impact for myself: “Art of Learning” by Josh Waitzkin and the general study and practice of Zen Buddhism- with an emphasis on practice. We can do all the theorizing we want; we can read all the trading books in the world, you can never become truly elite without repetition.

Thanks to everyone for reading. Always feel free to reach out to Ray on twitter-AllxDayxRayx- or in our EquitiesETC/Microefutures Trading Room Community where he trades and hang our daily with members. Good luck


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s