Visualization Leads to Realization |
By Price Headley |
Published
06/12/2007
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Currency , Futures , Options , Stocks
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Unrated
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Visualization Leads to Realization
Have you ever noticed that what you focus on mentally is what you get in end results in life? I had this experience when I played a rare round of golf. It had been quite a while, so my first few holes were shaky, to be kind. I noticed my mindset starting to become negative after the first two holes, and the third hole was a key point for my mindset. Read on for a realization that turned my game around, and how this applies to your own trading and investment results.
"What you focus on is what you get." I realized as I missed a fairly easy putt on the third hole that I was not focused on putting the ball in the dead center of the hole, but rather I was telling myself, "Don't miss this putt to the right." Guess where I missed the putt - to the right, of course. It's like our minds don't hear the phrase "Don't" and we do what we sought to avoid. Or else we overcompensate so dramatically that we miss the other way.
As I walked away from the third green to the fourth tee, I told my partner I was going to start visualizing a positive result, and that he should alert me if he saw me focusing on a negative goal. Almost immediately, I began driving and putting the ball more closely with the positive goals I set for myself on each shot. And as I executed the shot I had visualized, my confidence went up, which only further fed my focus to keep doing what was working. Certainly there were shots that did not match my visualization, but I quickly left those strokes behind and focused on the new shot at hand with no regret. And this mindset shift made my entire round so much more fun. I recall on the third hole questioning in my mind why I chose to punish myself by playing this game called golf, and yet those thoughts so quickly disappeared once my focus shifted to the positive and my confidence grew.
How does this relate to trading? Certainly we will all experience ups and downs in any form of investing. The winners will be resilient and will visualize success in the next trade, while the losers will remain stuck in the past mistakes and be frozen from getting into the present moment. Part of that comes from not trusting oneself to execute entry and exit, stop losses and a specific trading plan. And that lack of trust is often tied up in emotional and psychological issues in trading.
How much are you aiming to increase your portfolio this year? One of the best sources for goal-setting comes from the work of Ari Kiev, who has written several excellent books on the subject, including "Trading to Win" and "The Psychology of Risk." Kiev notes that once you define the dollars you want to make on a longer time scale, then you need to break it down to a "daily target." For example, let's say that a trader wants to make $120,000 this year in net profits. That breaks down to $10,000 per month, or roughly $2,500 per week or $500 per day. The one challenge I have noticed with the daily target is that you have to factor in your average winning day needed to make up for your average losing day. If 50% of your days were winners and 50% were losers, and you lost an average of $500 on your losing days, then averaging $500 on your winning days would only break you even. You need to average $1500 on your winning days to make up for the $500 losing days and still make you average daily target of $500 per day.
In my experience with goals, the more vividly I can visualize the achievement of a goal, the more likely I will attain the goal and more quickly I reach that goal. Visualization gives you a mental plan of attack, so you know how you will respond to any given situation before it even occurs. You should take your goal and then figure out the order of events needed to reach your objective. The more you can envision every detail, the better will be the clarity you are bringing into your mind's eye to move towards your goal's fulfillment.
It also helps to incorporate other sensory elements to heighten the visualization. How does it feel as you are moving towards your goal? Are you banging on a keyboard to place many quick trades, or are you more relaxed doing only end-of-day analysis? What do you hear? Are you talking with fellow traders or listening to conference calls or other information you are obtaining? These examples may or may not apply for you, yet the more vividly you can imagine your entire trading process and maintain this visualization during the assessment of the trade through the order entry and exit, the more often you will find yourself in the zone that leads to optimal performance. And the more you focus on achieving your goal instead of not losing or avoiding some feared outcome, the more potential you have to advance your portfolio to a higher level. If you're finding yourself stuck in one of these psychological traps, find some resources to help get you over that hump. Your success ultimately starts in your inner mind, and those mental seeds are later harvested in the outer world.
Price Headley is the founder and chief analyst of BigTrends.com.
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