By Rob Colville on October 17, 2014 in
Think for a second about the way you feel at the moment of execution. Does it feel a lot like a moment of truth, where all the merits of your analysis and trading prowess—not to mention your reputation and self-worth—are about to be put on trial?
It’s very final once you submit a trade, and I suppose that’s a big reason why so many struggle with fear and indecision at this stage of the trading process. Who knew a little red button could be so intimidating, right?
Well, on every time frame, and especially intraday, it takes faster, more decisive, confident, and all told, better trade execution to be successful, and to that very end, here are some surprisingly simple ways to achieve it.
By now, we all know that retail traders are going up against big institutions out in the marketplace, and also against computers and black boxes that use those “dreaded” high-frequency trading algorithms. Here’s the question, though: why fear the computers? Especially since, when it comes down to better trade execution, the computers can be copied!
You see, it’s not a superior trading strategy that makes algorithms successful. Sure, they use proven methods, but like us, no computer is “perfect,” or right all the time. Plus, retail traders can use and continually refine their own proven trading strategy until it rivals the algorithms’ performance, so it’s not about that. The real difference comes down to better trade execution.
Computers execute flawlessly, trading a strategy mechanically and free from fear and emotion. That’s literally what they’re made for! We humans aspire for that, however, we’re “programmed” a bit differently. It’d be awesome to “override” fear and emotions with just a few lines of code, but instead, we have to do it more manually in order to achieve better trade execution!
Start taking strides to close that gap! Identify what you’re feeling at the moment of execution and track in your trade journal. Think about ways to block out the “noise,” even if it’s simply reminding yourself to “Think like a computer,” acting decisively on qualifying set ups without any doubt or second guessing. And, make better trade execution one of your year-end trading goals to help pave the way for lower stress and a more prosperous year ahead.
Quite often, it’s forward thinking that stands in the way of better trade execution. Thinking about the end results of the trade, how much money stands to be won or lost, and trying to prove the merits of a strategy are all common problems that, at one time or another, have affected even the pros.
See also: Trading Hang-ups That Bug Even the Pros
There’s a simple, yet powerful saying, and it lends itself well to most any trading objective, including better trade execution: “Focus on the methods, not the money.” In this case, doing so can take away damaging forward thinking, prevent missed trades, and ensure better trade execution.
Merit of the Set-up – Instead of fixating on what can happen after execution, focus on what already is, i.e. the technical and/or fundamental traits that validate the set-up. If it meets all (not just most) of your desired conditions, it’s a valid trade you can simply “set and forget.”
Proper Risk Parameters – Fear of loss is probably the #1 cause of delayed or improper trade execution. Overcome this by always trading with pre-defined risk and proper stop losses in place, and reflect on this as needed. With it, the worse-case scenario of any trade is a financial outcome that you yourself deemed acceptable beforehand.
Accountability – It is every trader’s obligation to apply their strategy to the very best of their ability each time, so to waffle and/or hesitate during execution stage counts as “breaking the rules.” Stay focused and trade with discipline before and after execution. Plus, have a reward and punishment system in place to help ensure accountability and enforce good trading habits.
Imagine the satisfaction you’ll get from planning and executing high-probability trades in just minutes a day. Spotting clear chart patterns and set-ups, acting quickly and decisively, then moving on with your life, just as the Lazy Trader methodology intended!
Delayed or faulty execution could be the final barrier preventing you from realizing that stress-free lifestyle, and that’s why better trade execution is such a worthwhile trading goal. To achieve it, start by changing the way you think, whether it’s acting mechanically like the computers do, or focusing on the facets of the trade you can control, while ignoring the outcome, which you cannot.
In all, better trade execution is key to reducing trading stress, improving overall lifestyle quality, and for many traders, increasing efficiency and performance as well.