Specialty Skills

Don’t Be Afraid to Imitate a Successful Trader

Dr. Woody Johnson

Carla leveled a deep sigh as she looked away from her screen. Actually, it was more like a moan, a moan that belied the pain of having violated another rule that she promised herself she wouldn’t. When she looked back around, there it was, an option trade that she had exited prematurely against her plan after becoming gripped by fear. It was a bull-put credit spread that had gapped down causing her to panic.  Of course, as is often the case, the price action retraced and filled the gap after she closed the trade, then proceeded to move another dollar above her planned target.  Due to prematurely closing the trade she had a hefty loss rather than a nice profit and she felt sick to her stomach; she let herself down.  Not so much because of the missed profit, but because here she was again having violated her plan and her rules.  She felt out-of-control.  It was something that happened all too often and she didn’t know what to do.  On the other hand, she thought about Michelle, of the well-rounded and disciplined trader/instructors with Online Trading Academy who often taught the importance of allowing the market to prove your trade plan wrong.  Carla whispered to herself; “…If only I could be more like Michelle.  What Carla didn’t know is that she actually could be like Michelle, by using a process called “modeling” she could decode the strategy that Michelle used to plan and execute trades in a disciplined way thereby getting results that she wanted.

 Imitation or modeling is an extremely effective strategy for pursuing success in the wild world of the markets.  As the saying goes, if someone can do it, anyone can learn it.  Modeling is a way to meld curiosity and selflessness along with a desire to listen to, watch, respect, and learn from others; and as well yourself.  Additionally, modeling is an interest in process over content.  Process or the “how” something is done is arguably more important than content or the “what.”  The process is where skill is focused to create the end result.  There are countless ways to do anything, extremely effective ways, and there are time-and-energy wasters that might get you to the same result … eventually.  There are also ineffective strategies that are full of superfluous and meaningless behaviors associated with them that make achieving the goal(s) all but impossible.  Furthermore, modeling can take many forms.  Some of your most fundamental skills have been acquired through modeling others, like for instance, walking and talking.  Babies and young children are expert modelers.  Only when they start learning by more traditional methods do they begin to lose this instinctual skill.

 You can model anything as long as you identify the behavior components in someone who does that thing well. For instance:

  • Motivation to keep your personal commitments
  • Getting the knowledge
  • Achieving a personal best
  • Trade planning and organization
  • Technical analysis
  • Managing risk
  • Persistence and Perseverance

Equally, you can model excellence in your ability to:

  • Gamble in your trades
  • Violate your rules
  • Worry
  • Put on too much size
  • Leave your trade plan
  • React impulsively
  • Freeze in the face of fear

With conscious awareness you can choose to do something differently and break the cycle of continuing to do the same thing and expecting a different result.

 Modeling also involves mentoring; that is, finding and “sitting next to an expert or someone who has demonstrated skill at doing what you’d like to do well.”  This is an excellent way to model skillful behavior.  The subject being modeled can also benefit by learning from feedback on how they structure their experience; just because someone does something well, doesn’t mean that they necessarily know how they do it.  With this awareness the “unconscious competent”; that is, the one who doesn’t know that they know, can achieve even greater consistency in the skills they have by bringing all of their important behaviors to awareness. 

You can also apply the modeling process to yourself by identifying a skill in another area of your life, breaking down the strategy, and replicating it in your trading.  For instance, you may be methodical, self-assured and cautious in another part of your life, but highly anxious, impulsive and unpredictable when it comes to trading.  This is a common occurrence for many in the markets; and traders will tell you how their rules “went out the window” as soon as they felt the pain of a position going against them.  Traders finding themselves in that situation often moved their stop, or double-downed, or violated their rules in some other way.  Additionally, they became paralyzed by panic when the tick went against them and impulsively exited what looked like a losing trade only to see the price action move in their favor just a few bars later and would have turned what appeared a loser into a winner, just as Carla did in the above example.

 Uncovering the strategies involves observing personal program(s) that are sequences of mental and behavioral codes.  For instance, how you do what you do when you walk, talk, drive, read, or laugh.  Normally you don’t think of how you do these things, but they constitute a code of behavior that you have established.  The programs that make them happen are managed on your behalf by your unconscious mind.  These are known as strategies.  When you have the strategy for how someone manages his or her experience, you have the key to reproducing that experience for yourself.  Trading has context specific patterns that produce excellence around things like effective planning, rules setting, position sizing, money management, technical analysis and fundamental analysis among many others.  There are ancillary aims, concepts and frames-of-mind that indirectly support your success.  Often you will hear really successful traders share that they have a consistent pattern for selflessness—a notion of giving back, which reminds them that they are a part of a larger community and that this perspective helps them to maintain a viewpoint of remaining grounded in the face of greed.  Secondly, they have a larger reason or purpose that illustrates why they desire to be successful, one that is not money driven.  They have a skill in using metaphor and visionary thinking.  Winning traders are able to create a sensory rich vision of success that creates a subconscious passion for remaining focused on what matters most; that is, keeping rules, and following their plan. They also have a dedication to sequential and purpose-driven protocols, i.e. the development of effective routines that give way to the development of strong habits leading to skill-building around rule based methods of success.  These are additional strong concepts that are incorporated in many highly skilled and successful traders. 

Modeling, i.e., imitation, along with the other success oriented strategies above, helps you to identify, bring and keep your A-Game at your platform; which is exactly where you want it.  In “Mastering the Mental Game” we teach you how to do just that…attain, maintain and sustain your A-Game so that you can and will resonate with what matters most while remaining in the now of the trade.  Your A-Game will help you to minimize the distortion and distraction (the internal and external noise) that plagues traders constantly, just like it plagued Carla.  Ask your Online Trading Academy representative for more information.  Also, get my book “From Pain to Profit: Secrets of the Peak Performance Trader.”

Happy Trading.

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.