Execution, the Final Key to Trading
Funny, most newbie traders think that execution is the only important aspect of trading. They fantasize that they will day trade their way to riches based on their sense of “knowing” where the market is going. Even more interesting, many get off to a good start and, then reality sets in. The typical scenario is a number of small profits are wiped out by one or two large losses. Then a terrible cycle starts: the inexperienced trader will skip taking trades due to anxious feelings, and those trades make money. Their confidence grows; they step back in only to be hammered. This cycle repeats until they stop trading. Then they set out looking for the Holy Grail of forecasting.
However, if you took the first step and specialized, as introduced in my article Three Keys to Successful Trading, you developed a thorough understanding of a trading approach that fit with your personality and your favorite market. Then followed that step by moving through the preparation phase detailed in The Second key to Successful Trading: Preparation, you would then have critical statistics. First, you would know whether the technique was profitable, and second, the range of outcomes for each time a setup occurred. Then, convert the data to procedures. This is the final stage of the preparation phase.
Write out your procedures. If you cannot write them out, then you are not ready to trade.
The procedures should cover every aspect of the trade from entry to exit, be it a profit or a loss. No judgment should be needed. Now, let go of the forecasting. Just have procedures to follow based on the appropriate procedure for the current market. If the trend is up, you should have procedures for going long. If the trend is down, you shave procedures for going short. The pressure is gone; just follow your tested procedures. Execute your trading plan.
I graduated from the University of Washington, home of the Huskies. At that time, the coach was Don James, who took the Huskies to the national championship in 1991, six Rose Bowls (won four and loss two), won the 1985 Orange Bowl, went to 15 bowl games and was 153-7-2, including winning 22 straight games from 1990-1992 (source: Wikipedia). I recall once during an interview someone asked him why in a recent game he chose to run the play he did, and did he consider a different play. His response was “That was decided back in August.” James was not making decisions during the heat of the battle; he was following a plan.
That is your goal.