6 Steps to Improving Your Trading Patience And Discipline

I'm Mary black head of futures for SMB Capital a proprietary trading desk in New York City do you ever struggle with patience in your trading as we build a futures desk out we talked to a lot of traders most people we come across struggle with patience in one form or another in this video you'll see the recording from a talk I recently did for our developing traders on the concept of patience so sit back and learn how you can take six steps toward improving patience in your trading [Music] real laid-back here just wanted to talk to you about something that I know I struggled when I again January 2015 when I started here I could probably trade it too many names I probably traded too frequently and there's something that's okay about that in terms of just getting your feet wet getting in there getting dirty like experiencing just some stuff on the demo but you'll want pretty quickly to progress from that and prevent building bad habits essentially right you'll want to as you do start to get honed in on the niche that you want to carve out let's say you really like this week you like you like opening drive place you really like to second date plays you know from from last week or whatever as you begin to hone out that niche selectivity becomes important right patience becomes important so I want to talk about patience today I've got some notes and some things I wanted to just talk to you about but I mean all these old adages like you want to be a sniper right you want to sit back and wait for your opportunities you want to only take a plus setups you know all these things that we might tell ourselves that we want to do I don't think that for 99.9% of traders and I'm sure you guys are already ahead of this because you're here in this room it's not really about just like let me psych myself up in premarket and like muster up this discipline or self-control that I'm just gonna come in today and not do these things that I'm trying to avoid doing maybe some of you had I mean have you any of you ever had experience with overtrading or anything like that before yeah okay so you're human great so the thing I'd like to ask is what is patience who wants to give me a definition of patience what the heck is it it's tough right maybe a little tough what is it okay win to act or win not to act okay anyone else want to take a stab alright so I looked it up for us what is patience the capacity okay the capacity to accept or tolerate delay trouble or suffering without getting angry or upset that's like merriam-webster like right off Google right there the capacity to accept or tolerate delay trouble or suffering without getting angry or upset that I honestly did not expect to see the words like suffering and upset and what not in that definition I thought that was very very interesting because I think a big part of successful trading is finding a mindset and whatnot where we can circumvent some of these suffering that I mean a lot about trading is suffering it really is and then maybe you guys are experiencing that now but not only do we need to focus on doing nothing true patience requires more of us it asks us to do nothing and perhaps suffer in some manner but to do so without getting angry or upset so what is being upset that's a state of being unhappy disappointed or worried when I think about getting upset as a trader when you're trying to be patient there's four little letters that come to mind that might be something like FOMO right you experience FOMO which if you give in to that at the end of the day your review process you talk about how you didn't have patience right so we can't worry either we can't worry about this FOMO so are we supposed to be like Buddhist monks like what the heck we're supposed to do I think far from it so this brings us to a lot of the readings that you might find in terms of trading psychologists stuff dr. s might have said all these people out there who say that we're always we're humans we're always going to experience these emotions the the best simply use these emotions to their advantage right they essentially are aware of them but then they're able to make that choice to do the right thing despite those emotions even use those emotions to your advantage to bring you to kind of a higher level of understanding I think that's a really good start I think that's a really good place and perhaps some of you in the room that might be the ultimate place where where you find strength and the ability to have this patience and do what you need to do I think there could be a better way though so this is just my take on this I think we can work on these things as traders to actually circumvent the emotions now typically what this is seen like when you're dealing when you're in that moment of suffering when you're experiencing that FOMO and you're you're itching to pull the trigger and you're now listen there's all this uncertainty and all these things we deal with them to daily basis it's kind of a fight or a battle at least internally right that conflict may be totally within yourself some people experience it as a fight with the market which i think is also not not a healthy place to be we don't want to avoid the emotions where I'm not telling you that's anybody who tells you just like avoid the emotions like sweep it under a rug that's a very very bad advice we're not going to ignore anything but we're essentially gonna try and tell you about a way to you know Mark Douglas trading in his own right the best traders think about trading differently and so that's what I'm talking about here we're going to be able to prevent the emotions from even rising up when within us and trying to make us do something that we shouldn't for our methodology so let's break it down I got some points here number one doing nothing is an action okay it sounds kind of silly but doing nothing is actually something where you're doing something to do nothing it's not just the absence of action it's actually doing something so think about that - it requires conscious control one of the things that I talk to my guys and the futures desk about frequently is just sitting there in your chair even if you've got a lot of experience and just kind of drifting off into what I call autopilot mode can be really really bad because that's when you do something dumb because you're not taking conscious control of your decision-making so it's not something you just hear once and can be different I can't say hey take conscious control of your trading you know you have to decide to actually train on this skill of doing nothing what do we mean when we say game conscious control over your trading what would the opposite of that look like right what would not doing that well you're sitting there drifting off just kind of get sucked into the the tape reading or whatnot and you're you forget about context right all of a sudden you find yourself fighting a trend all day then you're kicking your butt at the end of the day saying I'm an idiot you know a couple things that I found helpful to help implement improving conscious control over your trading one thing is called a loop timer super simple stupid thing google it find it free ones are out there you'll hear a Dean like every five minutes every 10 minutes just a simple ding you don't have to go turn off the alarm you'll have to do anything but what does that do it's almost like giving you know we're like animal it's like giving a dog a command or something and all of a sudden they're like huh you know a dog will come out of like where was I what was that doing we're the same way snap yourself out of that kind of autopilot mode and come back to a place where hey let me step through my top-down approach here let me check the higher time frames let me make sure that this is in my playbook because boy I was about to do something stupid there wasn't really thinking about it consciously journaling is big journaling is huge it's it's so easy to just want to be a big boy want to want to just focus on the real sexy stuff and the important stuff but journaling thoughts one of the most important things I think someone can journal is not why you got in what the price was that you got in how many shares you got journal opportunities that you or what I call stalking journal the trades that you're considering taking why is that that's going to prevent us from some real BS in our review process you get to the end of the day and it's it's very amateur I really encourage you guys to guard against this looking back and saying I'm an idiot I should have bought there should have done that right it was a great move if you weren't journaling about the opportunities that you could truly see it's your current level of development at your current level of skills and awareness you actually don't have proof that of really anything about that moment but if you can look back you may have been stalking short when that was along and that's gonna be a real real eye-opener it's like I'm it's like athletes you know football players reviewing game film and and the ability to actually look at what you were capable of in the moment versus just saying well you know when I think about it I could have done this or should have done this really powerful so journaling in that moment brings conscious awareness to what you're doing and it's a great review tool as I as I mentioned you know I'm sure Bella's gets you guys very much on your radar mindfulness training all that kind of stuff yoga connecting breath with physical action all that type stuff are ways to improve self awareness mindfulness taking conscious control about what you're doing and then quite simply checklists sounds kind of stupid but once you hone in on a process for trading an opening drive trading a especially so slower things like a second date player whatnot if you find yourself maybe missing a few key variables making a few mistakes think through you know okay I absolutely can't miss this variable this component of the trade and then just force yourself before you ever take one of those trades just make sure it meets like three simple criteria or something it doesn't have to be complex you don't have to write a dissertation on the trade before you take it but have something out on your desk maybe it's a post-it note whatever check off okay hard timeframe key level makes sense you know trading time frame this type of weakness on the tape makes sense the price actions opened up and I'm seeing you know X Y Z it makes come up with those things have it as a part of your playbook and don't have it as a conscious decision making type thing right in front of you okay number three requires a process driven approach for your strategy I'm a discretionary trader are any of you here totally focused on like purely being on the quant team or anything like that are you guys all here to be like pretty much discretionary intraday yeah okay so just because I say you want to be processed driven in your approach does not by any means whatsoever mean that you can't be discretionary right you know how do you define a trend right doesn't really matter right you can have your own definition and it doesn't have to be quantitative you can look at a chart and say well it's going from bottom left upper right so I say it's an uptrend fine good for you but if maybe you're taking a checklist approach and you want to make sure not to fade a trend on whatever timeframe have that as a part of your checks as a process driven approach the input can be discretionary but the fact that it has to be checked and has to be a part of what you do can be very process driven obviously building out a documented playbook understanding exactly when we're under what contextual situations you do have edge so with this understanding you now have moments where it becomes true and a lot more moments where it's not true where you don't have an edge right some of you may have some good experience and you start saying okay I understand I already have a playbook I understand where I have edge the problem is married I jumped the gun I say that oh I say that comes down to two things one is a mental framework and two is a better thing that I want to tell you about which is a more process driven execution strategy a lot of people think through okay I want to have a Miss on earnings I want to have it break down a key level on the daily I want to look for XYZ on the tape bah bah blah but a lot of people don't act go from play booking the the kind of the overall setup and and thesis and idea for a trade down to like what makes you pull the trigger on a trade you know do you have variables for that are you just kind of like floating around kind of saying well you know I saw a bit of selling on the tape and I jumped at it right I saw a little bit of absorption and an offer that it wasn't lifting and it got hit for something that very well may be an actual trigger for you but I encourage you to as a part of you building out your trading business to not just think of the bigger picture overall things which are extremely important when you consider your edge in your playbook but if you do experience FOMO if you do experience trading where you don't have edge really think through to that final final stage of the stalking a trade and whatnot to where you finally hit the hot key and really think what does it take for me to truly hit the hot key you couldn't you could come up maybe I think for most it's probably gonna end up being maybe a list of five or six things if I see this that is a press the button moment and that's compartmentalized within the overall contextual edge that you would have with all the things you're putting together hypose do you guys do a morning sheet do you put down if-then scenarios those type things good good good so I call them high post hypotheses but it's the same thing I encourage you if you find yourself dealing with the need for more patients and not trading where you shouldn't be - not only do hi pose for if I see this I will trade here I'm very interested in this if this level breaks down blah blah blah feel free to have a hypo maybe it's something that you don't share in the morning sheet maybe it's something you just keep on your own have a hypo for if we're between this level on this level I'm not gonna touch it right actually be proactive about a no trade zone or something like that for me I'm a big market profile guy classic situation would be the SP opens up smack dab in the of yesterday's real fat balance area value area not a lot of edge in that high-volume zone there to lean off of not there's not gonna be a good level there unless you see a really strong drive from like the V pock or something like that but still that's reactive not anticipatory so for me to find a trade in that situation I'm gonna come into that session say no trade zone unless we test one of those edges of prior value and begin to fail or something like that and then finally number six thorough review process I know you guys were putting in the work I know y'all are doing it but the use of statistics and tagging in traitor view tag your trades tag your trades tag your trades and get creative about what your tagging you know feel free to not just say opening drive play and and that's the tag but perhaps there's some contextual tags in there what was the overall market doing at the time what are some other variables that you can connect that might have played a role in that trade maybe it's not even something that you're aware of yet but you realize it has the potential to be a big factor on the success or failure of those traits and begin to track those and understand them and then you're gonna collect some data because right now you don't know what the heck's going on but once you have the data now you can use that as really really powerful way to say hmm you know this is a good play but it's underperforming in this particular situation right I just got through reading the new book on Jim Simons Renaissance medallion fund those guys that's it's a fantastic read but those guys are putting things together mathematically and machine learning wise and whatnot that we might not connect so as discretionary traders doesn't mean that you should go try machine learning right off the bat as you're studying opening drive place but it does mean perhaps study your opening drive plays and whether or not they're in the same direction as a gap in the overall market right whether or not it's in the the same direction of its a with or against the strength or over performance under performance of the sector that it's in things like that and start to piece that together if you find a little piece of underperformance within a setup with edge it's like you just found a new edge it's just as good helping your your your bottom line is just as good as anything else you can do as a trader so don't forget to find those things so patience you know doing nothing is an action find ways to take conscious control think about your thinking be processed driven in your approach even if it's discretionary have an execution strategy now just a playbook for setups with edge but all the way down to here's how I press the button win and why feel free to use hypose to consider where not to trade as something that you're really being proactive about and then really use the review process to find places where you may still have an edge but you can highlight areas where there's an under performance so case um I was just sitting and thinking about ways that I could be helpful to y'all put myself in your your shoes when when I was when I was there years and years ago and definitely one of the things that this talk would have helped me in 2015 to perhaps take a step back and consider where not to over trade where not to trade and have that on my radar as something as as I look to develop as a trader any questions anything you guys want to ask about with patience or conscious trading or so for example some tools like cumulative Delta and things like that become pretty complicated with equities the approach of trading in play names which are let's say gapping plus or minus 3% plus out of areas you're leaving what I call areas of recent structure in terms of like market profile volume profile where that recent auction process has been occurring well you're just leaving that stuff entirely and what I'd been doing and having success with before was leaning on that structure for for my trading so stuff that's in place is typically gone from there right and for me when I get into those areas sometimes I feel kind of naked I feel like I don't have as much of a compass in those areas as I do think of it like second eye plays really that's that's kind of like more my specialty where I've got some structure to lean on I've got some really key areas where I can find what the auction is up to I like to find things and say like crude oil or the SP for example where we do build that structure and I get in earlier than when it's the opening bells is sounding two days later and we're gapping 3% right so it's just for me it was part of the process of honing in on niche and what made the most sense to me and things like that you you mentioned something along the lines of finding underperformance in a set up is the ability to find edge in that do you buy this do you mean being able to reverse the strategy nope definitely not reverse the strategy but find so let's say that you have a particular playbook trade your ABC trade you call it okay and it you're documenting it you're finding a lot of examples of it and it shows that it works what may not be obviously apparent at the onset he's going to be some situations obviously all play books all setups with the edge they still have losers right and I'm not here to tell you you you can find a way to avoid all the losers but I mean that's a terrible mindset losers as part of being a traitor it's part of doing what we do so just that with a caveat but doesn't mean you can't can keep working on the edge and find areas where in certain I think context is king I think you always have need to consider context right if all of a sudden you're a an a sending wedge after a technical break master that's like what you do you you even code it up or you guys doing some stuff and working on that you you code it up to where you find patterns you search thousands of stocks for those and you rather than just implement that across every single one you understand context is is a factor so not every single not all ace ending wedges are created equal right so just as a simple example find some contextual pieces where you may have an edge over all but it under performs in certain conditions and if you can just scale back the size or avoid those conditions where it under performs all of a sudden that's going from a 12 cent per share edge to a 20 cent per share edge if you can bump up that bottom line and avoid a few losers well enjoy guys it's um it's a hard time I know you guys are probably working weekends doing all kinds of stuff and grinding and new to big city and went on I came from a dirt road in Alabama everything can be in a place like this but enjoy the time it's a the hard work pays off and if you can find a way to just like Bella Bella talks about you know finding your niche find those things that make sense to you study the heck out of them find little areas contextual places where they don't work as well just keep edges or edges a thin you know edges are thin so keep grinding and enjoy the process I hope you've gained something from sitting in on this talk we had on patience in training what stood out to you as most helpful was there something you really disagreed with felt that we left out let us know in the comments below and as always if you want to get involved with SMB futures check us out at SMB future's calm try to well

Channel: SMB Capital

Views: 85,248

Rating: 4.9427643 out of 5

Keywords: trading patience and discipline, trading patience, day trading patience, swing trading patience, patience in stock trading, trading discipline motivation, trading discipline rules, trading discipline secrets of a professional trader, day trading, how to develop patience in trading, stock market discipline, smb capital

Id: NfLxrelCc2s

Length: 24min 34sec (1474 seconds)

Published: Tue Nov 19 2019