Just Execute When The Time Is Right

You may be an expert in technical analysis and are able to read the market movements.

You have a good eye in seeing who holds the balance of power on the chart and your trading plan takes advantage of that skill

Traders can look at a chart and see, according to their trading plan, if a trading opportunity is there or not.

All those skills are meaningless if you are unable to execute the plan consistently.

 

Two Types Of Execution A Trader Should Know

If a boxer has a mean right cross but never throws it, fails to execute that punch when the situation is right, their success will be limited.

Traders who have the the technical know-how, are no different.

There are two types of execution you as a trader should be familiar with:

  1. The mechanics of execution
  2. The emotions of execution

Understanding both of these are important in the day to day operations of your trading business.

Mechanics of Execution

This is having the ability to execute the plan and get into the trade and while it may sound simple, there are some issues that you should know.

Everything is worth your full consideration prior to the moment of trading in order to minimize the risk of unforeseen problems occurring:

  • What type of trading orders do you use with your strategy?
  • How do these orders work with the market you are using?  Slippage with entry and exits?
  • Do you use a pending orders to take profits?

The order entry system itself is the other aspect to the mechanical side of execution.

  • The speed of the trading network
  • The speed of your connection to the network
  • The physical distance you are from the exchange

Those three issues can have a potentially large impact on your ability to execute your trading system.

What about the program used to enter the trade and your skill in using it?

For example, if you require the ability to adjust orders quickly, switch order types, move your stops, are you able to do that with ease?

Not all trading platforms are the same and much like a cook using a dull knife to whip up a special dish, your choice of tools matter.

Ever had “fat finger” errors?  This is where you inadvertently input the wrong information?  We’ve seen it in the markets are on a large scale.

Here are a few examples:

Japan stocks rattled by $617bn ‘fat finger’ trading error | A Brief History of Some of the Market’s Worst Fat Fingers

Bottom line?  Know your tools and become an expert at using them with consistency and skill.

 

Emotions of Execution – The Silent Killer

Assuming your trading strategy has an edge in the market, the biggest roadblock to consistent execution, is mindset.

When you are in the process of anything trade related:

  • Observing the setup of price
  • Considering the entry of the position
  • Entering, holding and then exiting the trade

Emotions can run wild and distract you from what is important at specific points in time.

Moment of Truth

I call it that because we naturally lean towards thinking about the outcome of this specific trade and its importance.  Some traders, if not most, place vital importance on the outcome of a single trade.

Having this mindset can be gut-wrenching and can evoke amounts of rage when the “expectation” of a perfect trade, does not go according to plan.

Trading from a place of fear is not helpful.

You have done everything according to your tested trading plan in preparing for this moment – the moment of entering trade.  It is normal to want to be right and to win on this trade.

But trading is based on probabilities.

  • You will win
  • You will win multiple times in a row
  • You will lose
  • You will have a run of losing trades

There will be times you enter long at the high of the day.

You will exit with a healthy profit only to see price continue in your direction

Every trade you take according to your plan is unique and you will never know where it falls on the distribution of wins and losses.

Your job as a trader is to assess the probabilities and accept the probabilities before you enter the next position.

The outcome does not matter on this trade

What matters is the proper execution of your trading plan.

This is where your focus must always be.

 

Direct Your Mind In The Right Direction

Focus on the process of trading and not the results you are seeking.  There is far too much in trading that we can not control so our best bet is to:
Control the Controllables

There are not the sexiest of trading topics but in my opinion, these are the most important.  You must know where your mindset is before, during, and after the trade is done.  This is vital.

We test, prepare and the focus must be on the execution.  Full stop.  We control what we can control.

Positive results in your trading are much easier to come by when in the moment of the trade, your focus is on execution.  Over time, the good plan you are trading will show its worth.


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