Trading ? Why you have to start by asking yourself “Why”

The allure of trading as a route to building incredible riches has become embedded into common culture. The idea that something as simple and binary as deciding if the price will go up or will go down has attracted millions into the grasp of the Market. And by all accounts many more millions will join this journey.

But, as with all journeys, we need to begin by asking “Why”. Not just one question of “Why” but many questions.

At the onset of trading, or if you are on your trading journey already, the critical first “Why” to ask is “Why am I trading ?”. The answer may not be obvious, but for you it might be one of these: My friend convinced me, I joined a Fad and didn’t want to miss out, I heard you can make fast money and wanted to leave my job, I read a great book that made it all look easy, or joined an online webinar and signed up to trade.

Of course, you may have been driven by plain curiosity. None of the above defines a true purpose. The purpose behind what motivates you to trade needs to be thoroughly understood. Since ‘No Purpose, No Plan’ invariable leads to ‘No Profit’. 

Understanding your purposeful ‘Why’ will set up some trading critical parameters to set your trading behaviour. It sets realistic expectations that are achievable and sustainable and will leave you less disappointed, less frustrated, more focussed and certainly less stressed. So sort your trading purpose out, the #1 ‘Why’.

‘Why’ also creeps into what is driving your trading. ‘Why’ am I buying here, selling here, stopping out here, accumulating here  etc etc.. Do YOU know ‘Why’ ? Stepping back and asking ‘Why’ allows you to criticise your modelling, your process, your signal generator be that complex or trading off the ‘seat of your pants’. ‘Why’ allows you to check in on processes that may be built out of bad habits. One of the biggest failures of trading is a trader kidding themselves that they have the ultimate model, the greatest piece of algo driving their bullet proof plan- chances are it’s not as good as you think ! And of course ‘Why’ will lead to ‘What, How, When’ questions too. As a species, our greatest mistakes come from not asking ‘Why’ before we throw all our resources at a decision.

So the forces driving your trading decisions need a prod every now and then to be looked at and asked ‘Why’. Linked to this is the notion of Risk. Why am I risking so much ?, Why am I risking so little ?, Why am I risking nothing ?. Do YOU know the answer ? Seemingly an easy question, but very very few traders will be able to give a coherent answer to ‘Why’. The result translates to traders walking into the kill-zone of markets and to then get killed. The problem of not having an answer to this ‘Why’ will lead to those hair raising moments of ‘Why didn’t I follow process and cut my loss?’, Why didn’t I run the profit on the trade ?, Why’ did I open the trade in a market that is awake when I’m asleep ? Perhaps the lack of asking ‘Why’, our #2 ‘Why’ is behind the fact that greater than 90% of traders lose money. 

Our #3 ‘Why’ is short and sweet. ‘Why am I trading this particular product ?’. In a world of Forex, Rates, Soft and Hard Commodities, Cryptos, Precious Metals, Equities, Indices, Energy, Random length Lumber, Pork Bellies and Frozen Concentrated Orange Juice what has driven you to choose the product you trade ?. Have YOU really a clue ‘Why’ ? The point here is that you may have a model or an approach that suits a particular products personality.. you may have an aggressive type of model being applied to a product that is requiring a more passive approach... Asking this ‘Why’ will help you to have the most optimal path to profitability by aligning your process ‘personality’ with the ‘personality’ of the product. 

‘Why’#4 goes a bit deeper on understanding the markets corrosive impact on you. The ‘Why’ of ‘Why am I screen watching 9 hours a day ?’ A familiar story to many who sit often in isolation, the ‘Why’ here is something we’ve previously discussed in our AlphaMind articles, Time. Having a sense of ‘wasted’ time, hoping something will appear, dreaming of the move that doesn’t come, often for days on end will steal time from what really matters in life, which incidentally is Life, family, friends and precious moments… 
Our ‘Why’#5 shifts into the negative consequences of forgetting to ask yourself about any of the previous ‘Why’s.. Why didn’t I sleep well last night ?, Why am I snappy or having arguments?, Why am I binging on snacks?, Why am I looking older ? The answer will lie within those previous ‘Why’s’ you haven’t asked yourself.. leading to not only YOU being out of balance, but your trading being out of balance too, ‘Why can’t I see an opportunity in this market ?’. A trading plan destined to fail with no purpose, no process, poorly educated, mis-learnt principles from non markets educators, no understanding of risk, misaligned choice of product..the list goes on!

Some traders that AlphaMind have coached have had varying degrees of failure to ask themselves that simple question of ‘Why’, once understood and with appropriate coaching and mentoring we have seen a shift from traders having inconsistent and negative alpha to one that appraises the market with well thought out consistency based upon continuous learning, realistic targeting and sound risk processes. And they sleep better too….just by asking ‘Why’.
So whatever type of trader you are, do yourself and your alpha a favour and ask ‘WHY’…..