Aiming for the process in place of results will separate you from the win and losses. Meanwhile a tp trade builds ego and or stop loss trade develop the frustration. Which leads to the emotional decision takes place. By focusing on the process execution, will establish the discipline, develop the unshakeable psychology and mindset. Which needs to be successful in the trading. Concentrating on following the process will help you find the edge in the market. Which let the probability to play in your favour. However it’s not just a one time process instead this will continue as long as you trade actively in the market.
What Does “Process Over Results” Mean?
Focusing one the process driven trade execution in place of outcome based trade execution. It states that evaluating the trades on the basis of process. Like did you follow the trading rules, loss aversion, entry confirmation and all. However the process includes the following terms.
The Pillars Of Process Over Results
Entry Signal: Entry signal covers ignoring all the market noise and focusing on your entry confirmation. This entry confirmation includes example below 25 or 20 pips of risk. Enter after the liquidity or before the liquidity with the big stop loss.
Control Risk Properly: Placing the trade with the fixed risk according to your loss appetite and trading account size. Meanwhile it determines how disciplined you are in the markets and know the game of psychology and probability game of trading.
Deploy Stop Loss: The stop loss covers that using the stop loss while placing or executing the any trade in the market. However it preserve your capital from sudden spikes of the market by sketching the stop loss line on your capital. This works like if price goes below this then i’ll be done with this trade.
Stay Discipline: The discipline includes that following all the rules, trading only strategies based high probability setup. Pre-defined entry signal, trading with strict risk management. Or additionally trading only in the best trading hours in which you high probability to win.
Managing Emotions: When the market is trendy but isn’t giving the trade you want. You feel the very strong desire or string urge to trade and make money from it. In place of trading at the random zones to catch the move or make money. As a result you stay calm and wait for the trade to come on the setup. That’s what managing emotions covers.
However the a proper process or rules based execution may lead to the loss because the markets are uncertain and unpredictable. This unpredictability and uncertainties are the nature of the markets.
Why Results Can Be Misleading
In trading believing that winning trade is always a good decision. The trader might took the high risk in that trade or broke their any rule, increased the position sizing or lot sizing etc. That’s how trading results may be misleading sometimes.
Why Trading Results Lies
Long Run Bias: There are many strategies exist in the market but we trade only strategies who are very prevalent among the youtube and all.
Sample Size: Sometimes novice traders come with the beginner luck in the market and make their first 10-20 trade win. But after a while they struggle to make the profits again. Because they don’t have any proven system to trade, loss aversion management etc. A trader need more than or at least 100 trades to find the edge and to find what works well for them and what not.
Uncertain Distribution: However there is no strategy in the market who has 100% win rate in the market. Meanwhile you strategy may give some losing streaks as well amid the trading journey.
Untold Risks Behind The Big Profits
Increasing Risk: In the back of one big profit or returns, ofthe there is a big amount of risk is involved like using the more lot sizing than usual or increasing the risk with the same lot sizing.
Invisible Gearing: Most of time traders increases the leverage just to place the trade with big lot sizing with the same amount of trading capital.
Low Win Rate Strategy: When a strategy has low win rate ratio but still sticking to it because of the some left percentage of winning ratio which are highly profitable. Even though it impacts by blowing your capital little-by-little.
How Process-Based Trading Improves Discipline
Plan or process based trading will detach you from the outcome based trading and will shift your focus to the mechanised based execution. It eradicates the game of emotions from your trading by shifting your trading into the system based trading in place of high risk gambles.
Adhering To The Rules: Every trades follows the method based execution, while keeping in mind the uncertainties and unpredictability of the market.
Controllable Risk: Behind the every trade there is a fixed risk which follows per trade pre-decided risk. This risk is accordance to the trading account capital not influenced by the big moves or big profits.
Entry Confirmation: There is always a backtested entry confirmation remains involved, before placing the any trade in the market.
Emotions Control: All the process based executed trades in the market, are taken out of the emotions. Because method or process based trading teaches how to take decision without the emotions.
These are core pillars of process based trading, however it improves the discipline as well.
How Focusing on Process Helps Trading Psychology
Ultimately process based trading deattaches from the result. Because nothing in this trading to be taken on the basis of the outcome. Every decision involves in method based trading is taken according to the trading account capital and circumstances. Everything is pre-calculated in the process based trading before the execution phase. That’s why it reduces the fear, stress frustration and all the emotions.
Reduce Unpredictabilities: Knowing the consequences of the trade whether it wins or loses, however it puts a break on the brain to stop thinking about the outcome or the consequences.
Reduce Trade Pressure: However accepting the risk by giving stop loss in the trade, help traders to deal with random market spikes and movements. As a result it removes the pain of being wrong.
Eliminates Revenge Trading: A process based trading rules always puts a break after a loss in the session. Meanwhile it eradicates the term of “recover the loss”.
Reduces Emotional High: When a trader makes the big amount of profit by following his trading system. This is seen as the part of trading or the outcome of the process based trading. Instead of seeing as the i’m genius.
Practical Ways to Focus on Process
Aiming to focus on the process oriented trader, however it involves the strictness of following the rule either you are trading or waiting for the setup. Just tell yourself if i want to make my way through the trading then the discipline is the only road to my success.
Define The Max Loss Daily: Structure your trading in the way that after hitting maximum loss per day, you should not be feel urge to trade anymore on that day either you see any high probability setup or not.
Rules Checklist: While making the entry into the trade, check your all rules and conditions must be met with this trades. Which includes entry signals, loss limit, time frame and all.
Candle Close: Before the placing the trade wait for the candle to close in you favour or in the direction in which you are going to trade. Because it happens most of time traders takes entry in the running candle and when the candle closes against them, it’s turn out be a unnecessary loss.
Analyse Journal: Conduct weekly or bi-weekly journal assessment. Review your mistakes and look for room where improvisation is needed. Categorize the losses and the win, based on process or based on the emotions.
Conclusion
Traders are often stuck with the emotional decisions in the market because they trade with the outcome based process. Meanwhile success in trading requires to follow the process and disciplined based trading. However it involves the repetitive process to be followed over the long time. In trading the results may vary everyday but the consistency of following the same process everyday will drive you the better results over the span of 100 trades.
Check out my previous blog on Why Capital Preservation Comes Before Profit