Perks vs Purpose, Benefits vs Process

Getting your priorities correct in trading

I get asked a lot in interviews, how can I stay so calm in the midst of markets going up and down 2-3% per day on many days lately? My usual quick response is a quick: “Concentrate on the Process, Let the Results take care of themselves.” Even my wife is known to say every now and then, “The market will do what the market will do.”

But, there’s more to it than catchy sayings. My last Substack talked right up front about setting an objective before even starting to set up a historical simulation of a new trading strategy. I call that having a purpose. Sure, there can be many short-term perks from trading, but if you’re trading for the perks, you are really on shaky ground over the long-term. Having a purpose on doing anything in life gives you a solid feel for the direction you need to take. It allows you to ignore the minute-minute, day-to-day noise that the markets seem all too happy to provide us.

Every day in your trading process, there’s ample opportunities to be distracted, have your emotional buttons pushed, or deviate from the plan. If you break down what you do into little, easy-to-perform steps, it makes it so much easier to knock down each one of them and the day goes a lot smoother.

Another process issue I see many times with traders is in translating the research into an everyday trading strategy. They spend months running historical simulations, getting everything perfect. They’ve looked at how the strategy performs in up, down and sideways markets. They’ve got the position sizing perfect for their risk and volatility tolerances. They picked the perfect process to screen and choose their trading instruments. They can’t wait to get started trading it.

Then comes the first time that the FED makes some announcement or some impactful government economic data comes out, the market starts making a violent move against some of their positions and they scramble out of some positions, throwing the strategy out the window.

So, why would anyone spend months figuring out a workable strategy, only to abandon it on news that has nothing whatsoever to do with the strategy? They are concentrating on the benefit instead of the process. Running your strategy flawlessly each minute or day is what leads to the results you seek.

An excellent day in trading is one where you completely followed your strategy, not whether or not you produced a profit. A bad day is when you did not flawlessly execute your strategy, not a day with losses in the portfolio. So, focus on the process, let the results take care of themselves, and enjoy the ride!