Nothing is more beneficial to a writer than to get thoughtful response from a reader. It stretches your brain and helps to cover up any holes in your explanation. This is from the comment section of The difference between strategy and process.
(Italics are the reader)
Well, I almost agree, but just almost. Or, I think I agree with your overall idea, but I strongly disagree with your statement that “strategy is the least important part of trading”. To me, strategy is nearly as important as process (and risk management is a part of my process), but it’s not a matter of which is more important but which must come first.
The reason process is more important is because you have to be a trader to know it, to understand it, to explain it. You have to experience it and perfect it. You can know nothing about trading and put together a strategy that works at least for awhile. As a trader, I am spending my time doing things that are repeatable. That is why I have a process that allows me to execute any strategy. The process will allow you to get the most out of executing a strategy. Once a process is found it only requires slight adjustments. It takes more time to understand it and believe in it.
With traders, as with anyone involved in a performance activity (athletes, surgeons, musicians, etc.), the process part must come first. Process is the precursor to strategy that gives you the ability to consistently act/react in the best possible way given the situation. I’ll give a baseball example:Process: Keep the bat off your shoulder, keep your right elbow up, keep your head down, use a level swing, eyes on the ball all the way, step into the pitch, rotate your shoulders and turn your hips. And, most importantly, practice all of this over and over again until it becomes part of you. These are constants that need to become unconscious, to exist in the realm of muscle memory.Strategy: No outs and a runner on second. You want to hit the ball hard to right field, over the first/second baseman’s head, to get that runner to third with one out, worst case. Hitting a grounder right to the shortstop will only result in an out with the runner still on second (technically speaking, this is more tactics than strategy, but it still works as an example). In the example above, your team might still win this one game without a good strategy if you and your teammates have good process. Maybe your pitcher throws a shutout, or you whack the ball over the left field fence. But your team will probably be sitting at home when the playoffs start. In the same way, if you have good overall process you might have some small success as a trader, as long as the market doesn’t evolve into a different animal than the one you initially learned to trade. Imagine, for example, someone who started trading in August of 2010. Now, imagine that person trading from July through November of 2011. If he didn’t adapt his strategy to the conditions, he might be a former trader at this point. I’ll agree, though, that you can forget strategy if you haven’t first gotten your process down. That would be like knowing that you need to hit a fly ball to right field but not being able to hit major league pitching. So, yes, process is probably somewhat more important, but at the end of the day it’s really a moot point because trading is so challenging that you really need all facets of your game to be the best they can be in order to be successful.
The purpose of the process is to be efficient. To take the steps that you everyday and create a routine. Trading is mentally draining but getting ready to trade, what you do during a trade, and after should not be. Lesson decisions, more reacting in this part of trading. This allows you to be “alone with the market”. Inserting yourself in the market should be used sparingly. It relieves part of the stress of trading.
I like the first example better. It is acting for a reason. Giving the team the best chance to win. You can’t guarantee a win and if you do it wont be much to win. Low risk, low reward.
The second analogy is where I think I did not explain myself well enough in the original post. The purpose of the process is to be able to adjust. Think of yourself as a business owner. Which one would you rather be, the owner that runs the business and is focused on that or the one who is the secretary, accountant, janitor? The process allows you to be the first. All of your energy is directed to the right place, running the business/executing the trades. Once again, I do not think that must traders ever get to that point but unlike hiring a new employee it does not cost you money only time.
My favorite writer on the subject is Dr. Brett Steenbarger. His books and blog, (Traderfeed) focus on trading as a performance activity, and I don’t believe a person can find a better resource on this topic anywhere on the internet (and it’s free). He has moved on and no longer updates his blog, but he has left his wonderful archive of information intact.
Yes trading is a like a football game. Your mind has to be in the right place. I think people do not see that. When I stepped on the field as a freshmen in college I improved instantly. I was around better players and I was afraid of getting my ass kicked. I take that same mindset to the screens, everyday. When I don’t they win. I am familiar with his work and reading it I am very certain he has traded before. I understand the irony, because this blog is about trading psychology, but a process (followed and believed in) all but eliminates the need for trading psychology.
A strategy should not be taken lightly. It is important and like the reader said it comes later. It is best to make the strategy work for you than keep searching for the new hot strategy. When you jump strategies you have to start all over.
Once again thanks for the comment and I appreciate all comments. It gives me a chance to understand the reader and a second chance to explain myself.
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