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Your ability to concentrate fully and intensely can mean the difference between consistently taking home huge profits and barely staying above water. It's really important that you pay attention to multiple sources of information, sift through them, prioritize each separate piece, and make a wise decision once all information has been scrutinized. You can't be distracted and unfocused while formulating a trading plan or monitoring an ongoing trade. If you are sidetracked, you may make a mistake at a critical moment of investing. For example, you may interpret a key piece of information incorrectly, fail to see a trading opportunity, or wrongly conclude that a trading plan is viable when, in fact, unforeseen adverse events are likely to mess it up. Your senses must be fixed on your ongoing experience. You must develop an intuitive feel for the market and be ready to act instinctively. You must do whatever you can to focus your attention.

People differ greatly on their ability to focus intensely on their ongoing experience. Some traders can look through reams of information quickly and efficiently, while others must tediously study and carefully digest each new piece of data. It's essential that you accurately determine your ability to process information and find a trading method that matches your abilities. You can't fight genetics or your learning history. You have to face the fact that some people's brains are wired like a supercomputer, while others are wired like an electronic calculator. If your brain is like a supercomputer, you can process information quickly, store a great variety of information, and recall it rapidly and instinctively. Some people, for instance, can scan several company reports comprehensively while listening to the latest media coverage on television. Other people are slow learners who couldn't get through a single company report in a week. The trader with a high capacity for information processing may seem to have the advantage, but not necessarily so.

In my own case, I have a terrible time with simple arithmetic. I become confused when trades go against me. I can puzzle for hours over whether or not I'm making a profit or taking a loss. That is why I do the most simplified trading I can possibly do.

Why is it essential to know where you stand on your ability to process information? It allows you to develop realistic expectations. The trading lore is replete with stories of super-traders who party hard all night, but wake up the next morning to make dizzying levels of profit. The typical trader, however, cannot match this level of performance. The fact is that super-traders have a rare knack for trading. They can somehow sift through a wealth of information and come up with winning strategies than can be executed with success while they are in a daze. Most of us, though, are less talented. We have to make sure that we are rested, relaxed, and ready to concentrate. Concentration takes physical and mental and emotional energy. Just sitting at a desk reading a report, or studying a chart burns up calories. Don't think that your energy level is unlimited. If you want to concentrate fully on your trading activities, it is vital that you eat balanced meals, get plenty of rest, and be ready to face the trading day fully alert.

How can you increase your ability to process a wealth of information? Again, you can't fight genetics or your learning history, but you can enhance your natural abilities. With experience, you can learn to review financial reports, a variety of financial newspapers and magazines, and a cache of trading strategies with ease. With practice, you can anticipate what may go wrong with a trade, or know how to look at key indicators instantly. Over time, you'll spend less time doing the mundane tasks of trading, such as determining risk limits, and expend less effort. And when it takes less mental effort to trade, you will have more mental resources to devote to creatively search for trading opportunities and to monitor a trade after it is executed.

Trading takes your full concentration. Don't try to be superhuman. Realize your limitations. You can only do so much. It's vital to maximize your ability to concentrate. The trader who can concentrate brings home the most profits. 

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Thursday, 13 June 2024

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.