Reduce the Number of Decisions to Improve Performance
Posted on 6th June 2023
One of the best things a trader can do is to reduce the number of decisions they need to make in the actual process of trading.
Decisions need to be made quickly and in a short amount of time, sometimes in split seconds. The more decisions you leave to be made, the more likely you are to make incorrect decisions based on emotions leading to mistakes, which will ultimately lose you money.
Therefore, it is vitally important as a trader to build as many actions and processes into your subconscious, so that these decisions are made automatically by yourself, leaving your cognitive resources focussed on the execution.
There are so many parts of the trading process that can be set in place beforehand. The amount to risk per trade, the calculation of position size, the strategy, the areas you will look to trade from, the patterns that will lead to a trade, the instruments you are trading, the timeframes you are trading on, and many more.
''The calculation of your position size should be as automatic as you can make it so you can focus on the execution of the trade.''
All of these can be detailed clearly in a trading plan so that they become automatic as you work through the processes of trading – you know them as though they are part of you.
If you are a driver, I’m sure you have experienced it before, when you drive a route that you drive almost every day. You get in the car, turn the ignition on and arrive at your destination, everything else in between you cannot consciously remember because you have completed the same journey so many times before, that you act and react on autopilot without using up any cognitive resources in between.
This is the stage that we need to build in trading. Whereby as many decisions as possible are made on autopilot.
How can we achieve this?
As mentioned above, a detailed Trading Plan is vital. We must also go through this plan repeatedly before every session.
Repetition is the mother of skill, so there is an element of patience that needs to be exercised to allow yourself the time to build these skills into the subconscious.
Practicing in simulators as well as Mindfulness and Visualisation can also help expediate this journey.
Remove as many decisions as you possibly can, this will allow your cognitive resources to focus on the decisions that need to be made and not allow your emotions to dictate your trading decisions.
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