Unlock Your Trading Potential: Bridging the Gap Between Strategy and Results

Why is there a gap between my potential performance and actual results?

I've been trading financial markets for four years and have found a profitable strategy. However, I'm not making as much as I could be. Why is there a gap between my potential performance and actual results?

After some reflection, I realized what was holding me back.

The Overconfidence Trap

Often, I believe I have more knowledge and control than I actually do, leading to overly confident decisions with no basis. During winning streaks, my inflated sense of skill makes me take excessive risks, thinking I can perform in any market.

This is just one aspect of the problem.

Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead. - Paul Tudor Jones, legendary trader and hedge fund manager

The Reluctance to Acknowledge Mistakes

Other times, I have a hard time acknowledging mistakes, leading to repeated errors and missed learning opportunities.

This is not the worst of it.

The Tilt Mode

Tilt mode is when I make impulsive decisions based on emotions rather than a clear plan. The inability to accept being wrong drives me to make rash decisions to quickly recover losses. Can you guess the result?

You guessed it—more mistakes and further losses.

But these are just symptoms of the real problem.

The Real Problem: Ego Management

While I have a well-defined market strategy, I lack a system to manage my ego. Discovering Steven Goldstein's "Mastering the Mental Game of Trading" changed this for me.

Steven argues that trading is a high-performance activity like tennis, poker, or playing an instrument. To achieve high performance, we must keep our ego in check to avoid self-sabotage.

The 3 Ps of High Performance

A tamed ego allows us to harness its positive aspects while restraining the part that interferes with our tasks. But how do we do this?

Steven says we need to maintain the 3 Ps of high performance:

• Purpose

• Process

• Presence

Each supports the others for the best results.

Here's how:

Purpose

Purpose is your 'why'. Why are you trading? A clear sense of purpose powers your trading process and keeps you on track. Without it, you risk deviating from your plan, potentially leading to a breakdown of your strategy and losses.

As a retail trader, my purpose is to provide for my family by exposing capital in the financial markets. Done in a way where my potential for loss is small and my potential for profit is at least four times my potential loss.

My playbook is designed to take advantage of low-risk, high-reward opportunities in the market. I accept frequent, small losses and occasional underperformance as my bargain to play the game.

There is one quality which one must possess to win, and that is definiteness of purpose, the knowledge of what one wants, and a burning desire to possess it. - Napoleon Hill, author of Think and Grow Rich

Process

Process involves the steps you take to fulfill your purpose, supporting your ability to remain present. This includes your strategy, tactics, rules, and guidelines.

My process uses Camarilla Pivot Points to locate potential trading opportunities. Volume Price Analysis and Tape Reading determine entry and exit points. Semi-automated risk management strategies help manage trades. This structured approach helps me stay disciplined and focused.

By the way, my entire trading system is detailed in a book I ordered off Amazon: "A Complete Day Trading System" by Thor Young.

Presence

Presence means bringing the best version of yourself to the process to achieve your purpose. This is crucial because I’m prone to fighting undesirable outcomes through constant action, abandoning my process. Finding presence allows me to refocus on purpose and process.

My post-trade routine helps me let go of previous outcomes and associated emotions, viewing results as learning opportunities.

My post-trade routine is very simple: After a trade, I close my trading software, drink a cold glass of water, and step outside. I remind myself that trading is a game of luck, and sometimes bad outcomes are beyond control. It’s not a reflection on me.

Empty your mind, be formless, shapeless, like water. If you put water into a cup, it becomes the cup. You put water into a bottle and it becomes the bottle. You put it in a teapot it becomes the teapot. Now, water can flow or it can crash. Be water, my friend.- Bruce Lee, martial artist and actor

Then I review a few simple things:

1. Three things I did well

2. Two things I could have done better

3. One thing to improve

Conclusion

Successfully applying the 3 Ps lets you leverage the positive aspects of your ego without letting the negative aspects disrupt your performance. Unchecked, powerful emotions will interfere with your ability to remain present, causing you to abandon your process and purpose.

The 3 Ps of high performance tame the ego and keep it in check.

By focusing on Purpose, Process, and Presence, I intend to align myself with my trading system so that I can close the gap between what my performance should be and what it actually is.

I hope you found this informative. Thank you for reading!