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Become A Process Oriented Trader: Master the Process, Not the Outcome

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by Gavin in Blog
January 19, 2023 1 comment
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Contents

What is a Process-Oriented Trader?

Talk to any trader who has mastered their craft, and they will all tell you the same thing: you need to follow your plan. That’s what it means to be a process oriented trader.

While profits are important, many pro traders can go home happy regardless of their profits or losses as long as they follow their trade plan and process.

New traders see the huge paydays that are posted on Twitter and Stocktwits and associate this with success.

Every trader wants the 5-figure paydays or the freedom to set trades and manage them from the road.

They want to see their equity curve consistently increase, and their lifestyle reflects this change, but no one talks about the work it takes to arrive at this place.

When starting, it is easy to get caught up in watching your account equity.

You live and die by your PnL on the day.

This is a fool’s errand, though, because, in the market, it is more than possible to execute perfectly and have nothing to show for it that day.

The converse is also true.

You can trade terribly, mistime everything, and still leave the day very green.

This is fine in the beginning, but eventually, the market will punish you for these bad habits.

This is why being a process-oriented trader is important.

If your process is valid and your edge works, then the market will reward you more than it won’t.

You will not have wild account fluctuations because you know your risk tolerance.

You execute when you see a signal, not when it “feels” like a good trade.

A process-oriented trader knows his or her position size, stop loss, and where he or she is wrong on the trade.

They know their edge intimately and are okay taking losses, and they are okay leaving money on the table if a trade keeps running.

They are just happy sticking to their planned exits.

Most importantly, traders that focus on the process and not the outcome know that losses are personal and profits aren’t permanent.

They know to adapt as the market gives them new information.

How To Become A Process-Oriented Trader?

Knowing that it’s important to be process-oriented is great, but how do you become process-oriented?

First, you need to know your trading system.

Write down everything that is in it:

  • What’s an entry look like?
  • What signals that you were wrong in the trade?
  • Do you have a fixed or trailing stop?
  • Where is your take profit?
  • Is your risk: reward good?

These are just a few of the many things you should have written down about your trading system.

You want every aspect on paper so that you have something to hold yourself accountable to when you place a trade.

You also want it all written down so that you can look at your setups like a checklist.

If it doesn’t hit a threshold to become a valid trade, then you should not be taking it.

Yes, it may work out, but that defeats the point of becoming process oriented.

So now that you have the trading system on paper, you need to start looking for trades.

It is best to start on higher time frames because the movement of each candle is slower.

This will allow you time to look at a setup, analyze it to your plan, go through where you need to set your stop and take profit, and then execute the trade.

It is important not to skip this step because you want to build this habit perfectly.

Once you have your trade setup so ingrained in your mind, you can then move to faster time frames without worry.

You know you will not get “creative” with the trade management because you know exactly where it should be.

The final step to becoming a process-oriented trader is to look over your trade reports.

A suggestion is to look at them in clusters and not on a daily basis, it’s possible to have all of the day’s trades fail, but if you look at the week, you are still highly profitable.

Here you are looking for tweaks to make that will improve your process, look for patterns in your trade log.

If you are not very profitable every Monday for three months, maybe taking Mondays off will help you in the long run.

It is important to look at every aspect of your trades to see where there could be improvements.

Tying It All Together

So now that you know what a process-oriented trader looks like and how to become one, what’s next? You need to put the steps into action.

You need to execute on removing your emotions from your trading.

Most importantly, be patient with yourself.

A process-focused trader is looking for continual improvement, not an instant fix.

Some days will be better than others, but what you want to focus on is profitability and improvement over the long term.

A process-focused trader knows that once they have a solid system with a proven edge, then it is their job to follow it.

They trade appropriate sizes, do not get caught up in emotional responses to losses, and don’t get too excited about their string of wins.

They just focus on execution, and they can go home happy as long as they execute correctly.

So, use what you’ve learned, hone your edge, refine your process, and just execute.

Be happy that you are improving and trust that the results (and money) will follow.

We hope you enjoyed this article on becoming a process oriented trader.

If you have any questions, please send an email or leave a comment below.

Trade safe!

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.

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1 Comment
  1. Tom Rochford says:

    How do you keep from being confused on the basics – calls and puts — when am I buying a call vs. selling a call? Calls & Puts get very confusing when trying new strategies.

    thank you – Love your work with barCharts.com

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Options Trading 101 - The Ultimate Beginners Guide To Options

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