Process Based Trading

Process based trading

People who pay others like brokers, financial advisors, or IRA custodians to help them grow their money are frequently taken advantage of in the form of extremely low returns. Those who want a better return and begin trading their own money with little education are also taken advantage of  because these people trade with no plan, cannot be consistent in their approach to the markets, and have no confidence in their ability to get a higher annual return. These people often second guess their decisions and are easy for the experts to manipulate.

It’s for these reasons that successful investors and traders have learned to follow their process with less concern for the outcome of any individual trade. 

Becoming a process based trader is a better approach. You don’t have to have a full time job on Wall Street or years of experience reading financial statements. Anyone can become a more successful trader simply by being more consistent in their approach.

The 7 Pillars we teach work together to give you a specific set of expectations related to your trading and the rules that, if followed, will help you achieve them. Progress is measured through careful journaling allowing you to learn from you mistakes and continually improve your trading process.

Investing and trading with an understanding and confidence in the probabilities of your method helps you avoid mistakes made by less educated investors and helps you approach every trade in the exact same way.

Using probabilities to help you enter and exit trades consistently helps you remain unemotional and more successful. Using probabilities to determine an expected annual ROI goal based on the number of trades you expect to make over the course of a year helps you stay the course even when markets are more volatile or you hit a trading slump.

Following the probabilities helps make it easier to have confidence in your results and in your ability to continue having those results year after year. This confidence is especially important  when you first start trading and face the effort required to change a comfort zone. Allowing the emotions of fear and greed to drive decisions is a sure recipe for failure.

You Care More About Your Retirement Than Anyone Else

Perhaps you have paid for investing advice in the past.  Perhaps you have a 401k or an IRA.  Perhaps you know someone who tells you what to buy and sell and when to do it.  If this is the case, think about the performance this person has had for you over time.  Many of our students come to us because they have come to realize they could do better for themselves with a little work, discipline and education. And even a little improvement really matters. $15k invested at 30% a year for 15 years turns into $1.2 million…compared to the average mutual fund which would grow to just $27k. You can become a millionaire trader…but only if you improve your ability to trade…no one else will do it for you or help you get better returns.

Remember, professional money managers are paid to put more and more money under management…not to get that money to grow at higher and higher annual ROI. This is the big conflict of interest that costs us billions of dollars every year and keeps us stressed about money and our future. You will never be able to save enough to retire. But you can retire comfortably (and much sooner than you think) once you understand how to consistently and profitably get your money working for you.

If you’ve been intimidated by, or uncomfortable with investing or trading for yourself in the past, you have made the right decision to join our team. Our classes and course materials will walk you through the process of knowing and adhering to probabilities in your trading plan and in your actual trades. During the course of your schooling, you’ll learn about portfolio and trade management, how to set (and keep) stop losses and profit targets, and how to transition from virtual trading to trading with real money. You’ll also be able to mimic trades done in class by your instructor.

So as you begin this process of learning how to do this for yourself remember that no one (not even the highest paid people on Wall Street) know what is going to happen tomorrow. Their success is all about using probabilities to confidently adhere to their system. They use probabilities to give them an expectation for outcomes over many trades. They make careful course corrections only when actual outcomes different from expected outcomes…not because they allowed the most recent trade results to create emotional reactions which pulled them away from their system.

Treat This Like a Business

For you to succeed as an investor you will have to learn to trade like the pros. This means having a consistent approach to the markets. Focus more on the process of following your system than the outcome of individual trades. Develop a confidence in your ability to align your trade results with expected probabilities using the simple methods we teach. Monitor your trades. Learn from mistakes. Develop your ability to be patient before entering a trade and also once you are in a trade. Follow Wall Street’s example and cut your losses short and let your profits run.

If you’ve never invested before or if you haven’t had long-term success as a trader, it’s time to do an honest self-inventory. This may be a painful process but it’s critical in becoming a successful trader. As you develop this skill, you become a better trader, learning from your mistakes and improving your results.

Cultivate a willingness and a habit of doing completely (even brutally) honest self-evaluations. You can begin this process as part of your Battle Plan. As you go through the process of filling in your Battle Plan, write down the insights you have into your current habits of thinking. This means identifying those thought process which will support your efforts to have consistent profits and those which will try to sabotage you. This initial evaluation will be valuable to you over time because it gives you a starting point from which you can track your progress.

Don’t hurry through this evaluation. There is no rush. It’s best for your financial future to establish it on as secure a financial footing as possible. This means writing stuff down and then reflecting on it over a few days, improving it as you see fit. We encourage you to set up a paper trading account even as you begin this process of self-evaluation. While we want you to begin real money trading as soon as possible, we don’t want you to rush in and make costly mistakes. When learning something new, never begin with real money.  Always start with a paper trading account to build confidence in yourself and your ability to trade in alignment with expectations and the probabilities of your trading plan.

Paper trading is an important part of the learning process. Practicing the placing of trades helps you get comfortable with the technology as you develop a sort of “muscle memory” which helps you avoid easy mistakes caused by unfamiliarity with the technology of trading. It’s easy in the heat of battle to lose focus on the overall goal or plan with each individual trade.  Emotions of fear and greed tend to cloud our thinking and create a fog of confusion which often leads to losses even on previously profitable trades.

By trading with paper first, your emotions stay out of the trade.  You can map out the trade prior to the trade and then follow the trade exactly according to plan. Do this enough times with success and you’ll want to trade real money…it’ll be a natural response and it will feel comfortable and exciting instead of nerve-racking and filled with dread! So begin with paper trading. Start early in your education to combine the two most powerful ways of learning:  lecture and lab.  We’ll show you what to do in class and you’ll paper trade on your own.  This is learning by doing and it’s a great way to gain confidence in your abilities to have consistent success and to practice a consistent approach.

Avoid the Noise and Confusion

Investing is an interesting business. There are so many strategies, systems, equity combinations, and techniques used by really smart people to get trading profits and to gain a trading edge. You’ll be bombarded with data about companies, markets, the state of the economy, market swings, ads, and so many other points of view that it’s easy to get confused.

One thing to remember is that all of these data sources have a self-interest and want something from you. It’s better if you can simply turn it all off and avoid the temptations to react emotional caused by these strident and compelling points of view which aren’t up to your good. Try to avoid the noise and confusion since confused people do nothing and remain paralyzed by indecision.

So keep your eyes focused on the small things you do every day to follow your system. Use probabilities and the strategies we teach like a filter cutting you off from all that noise and confusion in the markets. Don’t let this noise divert you from following your successful system with exactness. Don’t let these come ons cause you to second guess your approach.

One Last Thing

Some retail investors approach the market so worried about losing money that they simply cannot make money. Don’t be like them. Whatever your Natural Trading Style, probabilities tell you that you will lose some trades. Everyone loses money in the markets. It’s not about not losing, it’s about remaining consistent in your approach on every trade. Trust in the statistical probabilities to help you take the long view and the most important number of your financial life: your annual ROI.  Set an annual ROI goal using the methods we teach you in Lesson 5 Trading Real Money 1 and use that as your North Star for guidance towards building your own financial peace.

It’s sometimes tricky to keep trades that don’t go according to plan from negatively affecting future trades. It takes a certain mindset to keep going. It’s been said that the biggest obstacle to success is found in the 4 inches between our ears. When a trade doesn’t go according to plan, don’t dwell. Don’t second guess your ability. Don’t lose confidence by puling out an ugly stick to beat yourself with. Simply tell yourself, “Next” and keep going.

Think about the greatest sports figures of all time. What did they all have in common? They all had confidence to continue playing despite the occasional slump. Did Babe Ruth hit a home run every time he got to the plate? No! He “failed” a great number of times. In fact he struck out nearly twice as many times as he hit home runs. But we remember him as the home-run king and not as the strikeout king because he persevered with confidence. Would we even remember him if he’d quit baseball after his first strikeout?

There will be times in your investing life when you will strikeout. Don’t quit. This is expected and through proper portfolio management, you’re already protected. Trust the probabilities and keep going. Keep doing the things you’ve been taught to do. Don’t let the naysayers or disbelievers stop you from achieving your dream of financial freedom and peace.


Take some time right now to think about how you react to life. Pondering questions like this and others that help you identify your skills and those things you know you have to be careful of. Are you afraid of failure? Is it hard for you to start something new? Do you quit if you experience failure? Do you tend to dwell on your mistakes? Have you sat on the sidelines unable to get in? Are you a natural planner and do you embrace structure or resist it? Are you patient or impatient? Can you live with incremental successes or do you like to swing for the fences of success?

Ponder your habits of thinking and habits of being over a few days.  Begin to write down what you discover about yourself and how you think that might affect your trading.