Ana_Idkit

Yesterday I wrote about the first steps we need to take to achieve our aims: clarify our outcomes and ensure we raise our commitment to the necessary level. This is what I  see as  the pre-vision and vision stage.

The next phase is to create our goals. In goal formation it’s important:

1. we define the outcomes of our strategic goals
2. identify the relationship between goals in different areas of our life so as to better identify inconsistencies and
3. come up with monthly, weekly and daily routines that will either bring us closer to achieving our aims or will remove some barriers to them.

In this phase, it is important we identify behaviour that is S.M.A.R.T.E.R:

• S: specific. The goal and behaviour must be written in sensory specific language.
• M: measurable
• A: active i.e. within my control and responsibilty
• R: realistic. Our goals should be such that just stretch our abilities. If they are set too low, we’ll get bored; if set too high, we invite frustration.
• T: Timely i.e. we set a deadline for achieving them.
• E: ecological i.e. in harmony with our other goals
• R: rewarded. As we’ll see, the reward stage is of critical importance.

This aspect of goal setting is what Ben Tiggelaar (author of Can Do!) calls the intent. There is also the other component to goal setting: identifying the likely conditions and situations that are likely to cause us problems. For example: if we have a problem with disciplined EOD execution, having an online feed and watching a ‘5′ minute chart is likely to lead us astray.

Finally we need to expose our goals to a reality check. In the pre-vision, vision and goal phase, how realistic have we been? For example, do we really believe we can grow from US$10K to US$300K in 30 days without risk of ruin? Or is this just wishful thinking?

Once we have the Goal setting phase complete,we can turn to making concrete plans to achieve our goals. I’ll deal with this tomorrow.

I wrote a series of blogs on the strategic aspects of attaining trading success – The Essential Strategic Elements for Trading Success and the series on Routines and Habits starting with Routines and Habits . I am  ending with Routine and Habits VII (January 2008)

In this blog, I’ll continue the thread by examining the link between Pre-Vision stage and the Action as a pre-requisite to trading success (for that matter for any success).

There are two very good books on this field:

1. Changing for Good by J Proschaka, J Norcross, and C DiClemente (1995) and
2. Can Do! by Ben Tiggelaar (2008)

Both are available from Amazon. Of the two, Tiggelaar is the more practical for most readers because it sets out a roadmap ‘to get there’.

Unlike most books in this area, the two works lay out the importance of raising one’s commitment to success as a preliminary first step. Proschaka’s team called it the ‘Contemplation Stage’ and Tiggelaar made it the first exercise in his “Get Real” Phase.

Most success books will tell us how important Vision is in our quest for success. But my experience is that the Contemplation Stage is the one missing in our journey. In this phase, we envisage future results and translate that into present behavioural habits. To do this we need:

1. To clearly envisage the end result: I find the NLP ‘death bed’ scenario ideally suited for the exercise. We are at death’s door and reviewing our lives. We see the immeasurable trading success we have had and ask: 1) What were the milestones? 2) At each milestone, who and what learning contributed to the result? 3) What problems and challenges did we face? 4) What steps (behaviour) did we take to overcome them? 5) What tools did we use (e.g. journals, visualization, etc)?
2. Place into context, the relationship between the end results, the rest of our goals, our life’s vision and our value.
3. Create some tentative goals and
4. Select behaviour that are  Measurable, Active and Personal (i.e.within our control) – M.A.P (Tiggelaar). Then translate the behaviour into a series of routines.

All four steps comprise the Contemplation Stage. They involve the creation of a context for our Vision and Goals. Speaking of goals,Tiggelaar made an interesting observation. He argues that our goals include not only intent but also the environment (stimulii). We need to be aware that at times our behaviour is automatic (i.e. controlled by the stimulii) and at other times by our intent. Creating habitual behaviour succeeds when we marry the two. For example, let’s say we want to lose 20 lbs. We formulate a strong vision and goal; we create a well formulated plan of action; but we ensure that our fridge is full of ‘naughty goodies’ (ice-cream, chocolates etc). In this case the stimuli and intent diverge and we are unlikely to achieve our outcome.

Finally on behaviour (action), Tiggelaar confirms the NLP presupposition that action is most likely to occur when we clamp future action to previously experienced intense good feelings. We create new behaviours when we imbue them with good feelings before we start the action; and achieve this anchor through a process of visualization.

The numbers of visitors from Australia and India have increased dramatically in the past 2 weeks. The US and Singapore still lead but the others are catching up!

In view of this, each Monday I’ll post a chart/charts of the stock index from each of the four countries with a short commentary. The ideas behind the analysis are all contained in the Nature of Trends. Each chart contains my thoughts for the direction of the market for the next five to ten days.

Figure 1 S&P 18-D

Figure 2 S&P 18-D

Figure 3 Strait Times 18-D

Figure 4 Strait Times 18-D

Figure 5 Australian All Ords 18-D

Figure 6 India Sensex

Trading success is no different to any other form of success. There are certain strategies that facilitate achieving our goals.

The first of these is VISION. I see ‘VISION’ as a motivational road map that encompasses all of the various facets of our life. Our participation in the markets is but one area of our activity and responsibility; success is much easier when all facets are in harmony.

The second is WRITTEN GOALS. You can’t get there, if you don’t know what there looks like! And because trading is a business, goals work best in the form of a business plan. (See Routines and Habits II). Your business plan includes having enough capital to see through the ‘ebbs and flows’ you will experience en route to your destination. There is a simple formula to determine the equity you will need to trade an account:

E = $R/%R

• Where E = equity needed
• $R = Dollar Risk
• %R= % of capital risked

The numbers assume we have records that allow us to determine that our approach will generate an acceptable profit. To acquire this knowledge, we back test the method or setup and after back testing, use CFDs to complete the testing. I say this because we can trade CFDs with a smallish capital base because of the smaller tic/point value. For example CMC offers a point value per contract in the ES of US$1.00 as against US$50 in the E-mini.

Of course, being able to back test means we have a written plan. The aim of back testing and ’small-size’ trading is to define the edge of our written plans. In addition, the results of back testing and reduced trading size also provide the data for our money management plans. During this ‘practice’ trading phase, we also hone our journaling and self-review skills.

Part of the function of business plan is to outline what we will need for our trading: a budget outlining the expected income and expenditure, equipment (including data sources), our plans (trading, risk management and psychological – e.g. at what profit or loss extreme will I stop trading and for how long).

The third strategy is to identify the daily actions that need to be turned into habits. I covered this in detail in ‘Routine and Habits VII‘. But to restate some of the more important items:

• Data collection
• Journal Entries
• Bill Paying
• Trade Preparation (including visualization and trade management)
• Provision for continuing research and education including time for deliberative practice (See The Psychology of Mastery and Practice) etc.

Finally we need to review the results of our actions in all areas of the business including the energy and money spent in our continuing education. Just as with our trading, we need to evaluate whether our actions are achieving the outcome we seek. If not, we need to change our behaviour; if they are, we need what can be changed to improve the results.