Respond to your trading environment, don't just react

Anyone can react, but only a wise man responds. A desire to react, in the moment, to our trading environment can be compelling, unexpected and catch us by surprise. As traders we face a constant battle with our self control and a great deal of trading is about controlling strong urges that we have to trade. Often times we need to prevent the strong urges that we have to trade from influencing us. The reaction part of us happens almost instinctively. So, in order to evaluate our desire to trade we need to pause. By inserting a delay into our instant reactive desire we can grow in self-control and discipline. You might recognise this. Have you ever put on a trade, and then removed it only to put it back on 10 minutes later? You are possibly oscillating between reacting and responding in that moment. We don't want to just be reacting to the markets, we want to be responding. The central pillar of responding well is paying attention.

Pay attention and be self-aware

Top performers pay attention. It is very difficult to perform well at anything if you are not paying attention. If you are both attentive and self aware you will be better able to manage your habits, your awareness and your ability to be self controlled. It will also give you the ability to empathise. What has that got to do with trading, you ask? Well, this is a crucial skill in the markets as you start to see what likely moves the market will make next. If situation X occurs then country Y will likely do Z. Adam demonstrated this in his recent interview posted here with BNN on the Canadian. It can simply be getting a 'feel' for the market. Think of other countries, how will they respond to their situation. At the moment think of China - what will happen next for them. Think about eventualities and empathise with their situations. It will help you be a better trader.

Attention and self-awareness will also help you be aware of your environment. Every day we receive a wall of information. The feeds tick away, the squawk is squawking and analysts are responding. You need to receive this information mentally and then you need to be able to understand it. The problem we have is that when stress gets too much, we lose out ability to make proper sense of our trading environment. We either freeze or just react. In either freezing or reacting we will have stress. Uncertainty and fear will go hand in hand with reacting. The state we want as traders is that we don't want to react we want to respond. A reaction is non-conscious. A response is considered, deliberate and managed. The good news is that we can improve our attention and awareness.

So, this week I have posted a number of posts on our mental state of mind. Why not go through them over the weekend and, if you are not already doing them, use them to stimulate your thoughts on practices you could implement to improve your trading. Have a great weekend and thank you for all the great contributions individuals have made on this thread over the last week.

Developing the right frame of mind for trading.

Thinking straight: Deal with negativity?

Born to win?

Developing a strong trading mindset

Enjoy your homework ;-)