The Most Important Trading and Investing Question You Need to Continually Answer
As many of our clients and prospective clients envision, day to day life in a brokerage firm offers variety, excitement, and challenges. Every day poses a new opportunity for decisions, which always leads to the potential for both gains and losses. Not surprisingly, the markets always comply, creating both outcomes for our thousands of clients. Yet, while the frequent excitement and challenges of our chosen careers and client’s pursuits has its allure, it can also create distractions. Often, when the market’s challenges are most fierce, or even when things are flatly routine, what we need to do is return to the fundamental anchoring that drives our decisions. Decisions lead to action and action is what creates the opportunity for risk and reward. Time and time again, we must always remind ourselves to return to a simple question that guides virtually everything we do. That question is, “Why?”
You might be asking, “what’s going on here?” Did Ken suddenly lapse back to his college Philosophy class which he quickly opted to take pass/fail? I assure you that is not the case. Rather, my intention is to highlight a critically important component of trading conviction and positive brokerage relationships that is often neglected. By increasing your consciousness of Why and how often it plays a role in your trading and investing life, your conviction will increase, decision making will be more swift, and your actions will be anchored to your own priorities. With Why, clarity is key.
You Do it All the Time
In reality, there’s a why behind your every action. There are so many Whys in our day-to-day life, it’s no wonder we eventually glaze over and they fade from our active consciousness. Here is an example relevant to the world of trading:
Trade Entry & Exit: Let’s say you’re a customer using broker execution. You’re open to suggestions from your broker and he calls to say he thinks corn is a good buy. What’s your very next question? It’s, “why” because you want to know the facts supporting his decision. Doesn’t his response bear the full weight of guiding your action or inaction? If his rationale falls flat with you, you’re likely to do nothing. He had a weak answer to Why. If his Why resonates with you, then you’ll likely take action. If you do so, you’ll have solid anchoring for your decision, and your expectations are set accordingly. The same dynamic applies for trade exit.
Self-Directed traders go through the same process in this example, except they have the added responsibility of being accountable only to themselves for consciously justifying their Why. Often, their Why resides in the trusted technical chart setups they use for trade entries and exits. If their faith in those indicators fades, so too will their Why. Often, a search for new indicators is really a quest for the satisfying conviction that comes from a confident Why.
Can you articulate with conviction your Why for every trade entry and exit? If you can, do you feel confident as a trader? If you can’t, how has it affected your confidence and actions?
Even if you’re only considering participating in the futures markets, Why still matters. In fact, your Whys are some of the most structural to be addressed. Consider these: Why are you interested in the markets? Why now? Why would you choose to participate or why would you choose not to participate? Why are you willing to take the time and effort to find out if this is right for you? As you can see, these are some deep Whys. If you cannot answer these with conviction, will you be on strong footing should you eventually participate in the markets? Wouldn’t you have more confidence with a quick and solid Why for each?
What happens when we lose our Why?
There’s empowerment in consciously using Why as a basis for decisions and eventual action. But often, amid the fray or even the mundane, we lose track of our Why. Absent this important anchoring, we are prone to drift off course. What happens? As the title of this article hints, we lose our way. Sound logic and trading decisions give way to the emotions of greed and fear. Decisions that were once measured and concrete are now shaky, superficial, and instantaneous, often playing right into the market’s hands. We search for answers and possibly new solutions, but what we might really need to do is revisit our Why, or lack thereof. Absent a sufficient Why, perhaps the only outcome is that we ultimately do nothing. Some would argue that’s a fairly benign result, but those individuals that are okay with such an outcome probably do not embrace the adage, “nothing ventured, nothing gained” and in our world, that’s a fairly important mindset to possess.
Remember – If you can’t articulate it, it doesn’t exist.
Superficial Whys are weak. Trading and investing is challenging. The mighty pendulum of the markets produces great highs and lows and it will shake out those with a weak Why or spook some before they ever get started. Here at Daniels Trading, we encourage our clients and prospective clients to consider their Why before many actions. It isn’t always easy, but it is vitally important. Many times, people can’t immediately articulate their Why, and we are trained to know that lack of Why can usually foretell problems ahead. Quite simply, if you can’t articulate it, it doesn’t exist. Challenge yourself to find the words and I’m confident you’ll be well served by the clarity it provides.
My Why in writing this article is to help you become aware of a deep driver of your actions (or inaction) and the empowerment benefits available to you should you choose to consciously consider your Why more often. The relevant examples are numerous, but for the sake of brevity, every trading and investment decision, from entry to exit and everything in between, is driven by a Why. By consciously considering Why before every decision, you’ll likely find a whole new level of conviction and confidence in your actions. As anyone who has ever traded or invested can attest, those benefits can help you not only in that arena, but in many others as well.
Futures Trading Starter Plan
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