Whatever system or strategy you trade; you ultimately want to reach your full trader potential as an independent trader. What do I mean by that? An independent trader has transitioned along the steps of the trader development path while developing a unique trading style. But most importantly, he or she trades in a Cool, Calm and Confident way with Consistency – the famous 4 Cs.
Could you (or anyone) demonstrate these 4 C’s right after you opened your first trading account? Certainly not. There are a good number of hurdles to overcome – of which most traders are unaware – even ignorant in a kind of naive way. This is one of the reasons why most people who become successful traders leap hurdles for many years to achieve their success.
The process of acquiring the 4 Cs, however, does not have to take years. Actually, every new trader should set a goal to become an independent trader in less than a year! Can you accelerate your trader development to achieve that? More and more trader students of the Van Tharp Institute have been doing so. They’ve found three keys to fully unlock their potential for successful trading. Let’s have a look at these three important keys.
Key 1 – Trading Systems with an Edge
This key is a bare minimum requirement. Entering a Formula 1 race without having a race car is certainly a bad idea. Actually, though, this first key is the easiest to obtain either by creating your own trading systems fully tailored to your needs or by adopting someone else’s systems that fit your beliefs and your style of trading. Even though there is no Holy Grail system or indicator out there, you still need good systems. Just like simply having a competitive car is insufficient to win you the race, this first key alone cannot fulfill its purpose if you do not obtain the 2nd key.
Key 2 – Trader Development Process
This key represents the biggest challenge for new traders. Typically they just want to jump into the markets and trade right away trying to catch every move they see. This might be called Naive Practice with the loose goal of getting better over time – though the amount of time might take many years. Worse, this approach creates drags on progress such as; unstructured practice, bad habits, unuseful beliefs, and emotional hurts. Undoing all these can take longer than starting with useful mental states, beliefs, processes, etc. from the very beginning.
I recommend getting started the right way – which seems slow at first but is actually a much, much faster path to becoming an independent trader. Please understand that you will find the Holy Grail between your ears – it’s the process of developing your trader skills – of attaining the 4 Cs! Do you want to spend years being frustrated, generating marginal results, and improving in slow motion? That takes just too much time and has a very high emotional cost.
You want to move fast and trade with the 4 Cs now – or very soon – at least this year – not years from now. But how can you do that?
One effective method of rapid trader development involves Deep Practice – a drill routine during which you grow quickly through repetition and making small mistakes. Imagine a new skydiver going through practice drills in a wind tunnel. The wind tunnel allows the student to speed up the learning process by practicing proper form, making few mistakes, repeating, and testing new moves – all in a fast-paced environment of accelerated growth. In just an hour or more of tunnel time, the student gains the equivalent level of experience from days or weeks of plane jumps for only 20 seconds of freefall time per jump. Imagine the savings in time and expense of using simulation to become a competent skydiver!
Deep Practice for trading has been basically impossible because of the variability of live markets. In the past, you had to wait for hours, days, or weeks for the right market conditions to practice the rules for your system. Now, however, traders can use simulation technology to create the right conditions in an instant – and to repeat (drill) the proper execution until it becomes ingrained. Simulation accelerates greatly the trader development process as it provides a safe, secure, and structured environment where you can fully experience and deepen the understanding of your system. Imagine the savings in time and expense of using simulation to become a competent trader of your system!
You want to reach the Competence level (see figure below) by becoming a “Simulation Pro”, i.e. executing trading systems with consistency in a simulation environment. Reaching Competence requires typically around 100 simulated trades or more per system. Each trade pattern is very special in its own way so lots of practice trades reveal pros & cons for individual opportunities and enables the trader to develop a sense of opportunity quality.
Only after you have mastered consistency with a cool, calm, and confident mind in simulation mode do you want to approach the Live Markets with the goal of becoming a “Live Markets Pro”. Achieving Competence in the markets is more difficult due to the added complexities of live trading. In effect, a trader needs to build his or her live market processes first before developing live market trading competence. This stage takes 3 months typically.
Source: adapted from Trading Chaos by, Bill Williams
Where are you now on the Trader Development Process model? Relate your dominant emotions trading to the third box at each level. Which emotions seem to match most closely with your current experience?
Even after reaching the stage of Live Market Pro, however, a good number of traders still hit a wall. Even though these traders may have a good performance in the markets, something is still missing – the 3rd Key! This key transforms the trader into an independent trader with his/her own specific style of trading the systems.
Key 3 – Having a Strong Psychological and Spiritual Base
Some traders can be quite successful owning just the first 2 keys, however, most will start to struggle somewhere along the way without the third key. Many of my trader students improve their skills greatly but the better they get, the more important their psychology becomes for determining success. Compare this to a race car driver who knows the course intimately and performs well during training but in the race, comes in behind the pack. Can you identify with this? I guess most can.
As you develop as a trader, look at and work on improving your psychology and mental state. As an example, many traders find a few powerful unuseful beliefs which are often emotionally charged. Often, these surface in situations where the trader’s “buttons get pushed.” Strong emotional states arise in these situations as a result of emotional hurts accumulated over the years. You want to let go of that hurt. Though getting rid of these charged beliefs is a minor issue, not every trader is ready to put in the work or effort to release them – even though there are huge benefits. Releasing emotional charges allows a lot of positive energy to find its way into your life and this has a very liberating effect. I get feedback repeatedly from students who do the releasing work to see their trading results improve and also to find a lot of positive changes happen in their personal life.
Can you imagine trading the markets in a Cool, Calm, and Confident way with Consistency? That’s the goal. To get there, work on obtaining your three keys.
I am looking forward to meeting you in person soon,
P.S. You can get your 1st Key – three Forex Trading Systems with an Edge at my upcoming Forex Trading Workshop.