Where Is My Trading Sh*t? How To Target And Eliminate Mistakes

Lessons from July review

“Trust the process” is a saying that gets thrown around by performance junkies like myself.

Coined by the University of Alabama coach Nick Saban, the process is about focusing on doing the small things well - practicing with full effort, finishing a specific play, and converting on a single possession. A single play is only a few seconds. The season is made up of these seconds. The process is about ignoring the big picture and instead assembling the correct actions in the right order one after the other.

The parallels with trading are clear. Focus on each small step to execute the right play with an edge at the right moment. Then do it again. Try to forget about the big-picture dollars.

However, there is one major obstacle that stands in the way: Mistakes.

Right now, I am the king of mistakes. What holds me back from being great at this profession are the same repeatable problem patterns that have not been resolved. It’s gut-wrenching. These are the roadblocks to converting the process. If you have similar demons this post will resonate.

When it comes to these trading mistakes, I am using the following steps to change my perspective and put this philosophy into practice. This was inspired by a recent tweet from Mike Bellafiore: “Where is my trading awful?”

Where Is My Trading Awful? Identify The Problem Patterns Through Data and Observation

There is nothing more sobering than staring at your fk-ups at the end of the day.

A starting point to determine where performance is breaking down is to clearly define mistakes, errors, and problem patterns. Be true to the data and let them jump out of the page. It is only by recognising these areas and owning them can they be truly eliminated.

Going through my July review and specific playbooks, the same shortcomings appeared from prior months.

For example, for my “morning drive” strategy, I am awful when:

• Chasing an entry post 10.20 am. The risk to reward is diminished post this point. If I am chasing, it is almost always because I haven’t planned the trade and am reacting.

• Being involved in subpar catalysts with many moving parts. This is just being a moth to the flame.

• Shorting stocks on big gap downs. It is the gap that creates traps and very messy tapes.

• Not automating my size pre-open. If I don’t plan properly, I do not commit to the trade and the real EV of the opportunity.

• Not taking stops in full. The stop should reflect where the idea is wrong. In aggregate, a move above or below this level means the position will move against me. Thus, it makes no sense to not get out of everything.

Here are some examples to better illustrate.

TLX

I chased an entry instead of being front-foot. As such. the risk/reward of the trade changed dramatically.

WHC

This was a mixed catalyst with a low grading due to many moving parts. The conflicting variables led to messy action. Yet I still traded the stock when I saw some strength. I also didn’t stop out in full when wrong leading to more slippage.

ALD

Shorting a large-cap stock on a big gap down into the low end of the Daily range. A trap ensued.

The data is so clear that these habit patterns are destructive to performance. They are the kryptonite to an effective strategy and process.

It doesn’t just end there.

What Other Habit Patterns Hold You Back?

It is one thing to have an edge, and it is another to chase the latest flashing toy. Most mistakes I witness fall into the latter.

The brain is simply not wired to deal with the overload of stimulus we face as traders. Constant information and temptation is being thrown at us which disrupts even the best-structured plans.

Some of the most destructive patterns are a consequence of not reconciling this and our aroused emotional state.

For example, I am awful when:

• Reacting to a callout where I have done no work, reading, or thinking.

• Being involved in spec or illiquid stocks leading to slippage and crowding.

• Entering new positions from 11 am to 12 pm AFTER the meat of the move is done.

• Flipping from one direction to the other.

These are all “overtrades” where I totally deviate from the rules of the edge. They are obvious in hindsight but in the moment they feel so compelling.

Where I think most people struggle with overtrading is because there isn’t just one simple answer or type of overtrading as you can see from the above examples. What are the patterns of when you overtrade? What are the commonalities? What was your emotional state at the time?

These tendencies arise when I feel I need to be involved or have missed a move. I think it comes down to my impulsive nature and always wanting to participate. I find it hard to say no to things. I am competitive and the feeling of missing out is a hit to this psyche that I should be first.

Now that these problems have been identified, specific solutions can be built to correct them.

Build Solutions To Address The Patterns

Mistakes will always happen. You cannot play a game of perfect.

What is in our control is being conscious of our weaknesses and minimising their impact through specifics. The very best can eliminate the strategies that are not working for them. They put in place solutions to lessen harm.

Through my end-of-day report card, I am now singularly focusing on the goal of trade selection and eliminating mistakes with clear action steps. I am learning to say NO.

For example:

1. Create a mistakes tracker to specifically target the problem areas. Reps reinforce these patterns.

2. Update morning planner to include "Daily and Intra chart must align".

3. Plan, grade, visualise. This creates a space between trigger and action.

4. Increase the grading thresholds to define a trade. Need > 8.

5. Autoload stops in FULL into my risk management software after every entry.

6. Max 3 tickers in a time block for my morning drive strategy.

The mistakes tracker is very simple:

• Did I chase an entry post 10.20 am:

• Was I involved in subpar catalysts < 7:

• Did I short on a big gap down:

• Did I automate my size pre-open:

• Did I cover winners as per my exit rules:

• Did I stop in full in the right spot:

Sum the totals and expand on any mishaps. Continue to track, review, and then implement.

This constant engagement with our problem patterns re-wires the brain to better execute in real time.

Conclusion With Some Science:

Mistakes have the potential to accelerate your development as a trader. Be open to them.

When an error occurs, the brain releases chemicals that increase your attention and alertness, triggering a need to adjust and get it right. This means the moments after a mistake are so crucial as your brain is opening up the door to neuroplasticity. If you ignore or walk away, your brain learns to be less capable of coping with failure next time.

From Sara of “the high-performing trader” Substack¹:

Taking responsibility facilitates the formation of new neural connections via the release of acetylcholine. This only happens if you engage with the mistake, reflect on it, and try to correct it….Make it count!

To succeed in trading, you need to become an exceptional loser. To truly fulfill your potential, you need to follow the process step by step and eliminate those mistakes identified. Each step in the process is an opportunity to act according to the trader you want to be.

I have opened myself up. You may find a similar process helpful.

“the best way to avenge yourself is to not be like that”

Marcus Aurelieus, Meditations 6.6

1. https://theperceptivetrader.substack.com/