Focus plays a significant role in your mastery of trading. “Mastery is not a function of genius or talent. It is a function of time and intense focus applied to a particular field of knowledge.” —Robert Greene, Mastery.
In the article “Mastery and Learning” we looked at learning from two perspectives: direct and derivative.
Direct being from one’s own experience and derivative being from the input of others. From the comments received the topic apparently caused thinking and discussion about the value of each, the importance of each, and which one is of more value to a trader. While we do not believe there is one right way to advance one’s learning process as a trader, we do believe there is a ‘right way’ for the individual trader based on who he or she is as a unique individual.
For example, one of the attributes we all have is the ability to focus. Please note, we did not say the quality of the focus, we only said the ability to focus. In working with sub- scribers and clients for several decades, we can say that there are individuals whose ability to focus is similar to ‘the attention span of a gnat’ while there are others who have the ability to focus or concentrate so deeply they lose track of their surroundings, the temperature, and/or time.
In Mastery on page 279, Robert Greene says this about focus: “There are many paths to mastery, and if you are persistent you will certainly find one that suits you. But a key component in the process is determining your mental and psychological strengths and working with them. To rise to the level of mastery requires many, many hours of dedicated focus and practice.”
Enter the concept of the Anchor Trade.
In most fields or vocations, success belongs to the specialists. The specialist, whether in sports, business, medicine, law, or cooking is the individual with a refined focus yet, at the same time, a generalist when it comes to context.
In my own personal trading journey which began in the early 1990’s, I made it a priority to meet with, learn from, and work with, many very successful traders. And, in doing so, observed something that was almost universal between them and that was, beyond possessing extensive market knowledge and self-understanding, they had one or two trades that were consistently profitable.
Some called them their ‘bread and butter’ trades. A trade or trades they knew intimately, understood deeply, and executed almost flawlessly. A trade or trades they had dissected, examined, built on, subtracted from, and refined both contextually and to the smallest detail. And, in doing so, had the ability to confidently know its expected and potentially unexpected behavior in various market conditions.
For example, there are traders who only traded the open, the close, key report sessions, a specific contract or market, the future’s roll-overs, spreads, options, and/or a single stock.
The point being, they discovered what worked for them and became ‘specialists’ with a trade or a few trades within the context of their general knowledge and understanding of the market, the market’s auction process, multiple timeframes, intermarket relationships, and various other trades scenarios.
In fact, there are many traders who actually have a portfolio of several ‘anchor trades’ and are very successful trading multiple markets and multiple scenarios simultaneously. Bottomline, to varying degrees, they each discovered what worked for them.
The origin of the Anchor Trade concept: As the developers of WindoTraderBLUE, we are frequently asked: Who are the best educators? What books or videos should I buy? What’s the highest probability trade you see or hear about that I can learn?
What is interesting about these questions, as well as many others, is that they are asked by both novice and experienced traders. The experienced traders covering a range from five plus years of experience to some with over 20 plus years. And, many with floor experience who just haven’t been able to really make a successful transition to the screen.
Caveat: The ‘Anchor Trade’ is not the answer to successful trading. On the other hand, it has proven itself as an answer in helping many traders make a paradigm shift in the way they approached the synthesis of their learning and trading processes.
With that background, let’s explore how the Anchor Trade concept is supported by your trading software with one caveat, and that is, this commentary is not designed to teach you how to trade an Anchor Trade, its purpose is to share a concept that has worked for countless traders and might help you advance your overall trading process—nothing more—nothing less.
So, what exactly is an ‘Anchor Trade’? An Anchor Trade is one or two trades that you ‘own’ and know intimately, its characteristics, its attributes, its behavior, and, how it usually responds or reacts in certain types of market activity. It is a trade you’ve studied, tracked, journaled about and, as I said before, own and continually refine.
It increases your odds to potentially identify and capture better trade location which, in turn, increases your probability for a profitable trade while reducing your risk exposure per trade and ultimately conserve your capital.
Assuming that’s so, let’s take a look at Focus as illustrated by two legends from professional sports, Vince Lombardi and Ted Williams.
We begin with Vince Lombardi who is acknowledged as one of the greatest ‘pro’ football coaches of all time and exemplifies FOCUS as shared in a comment by John Madden.
John Madden, second only to Vince Lombardi in the Best Winning Percentage as of the end of the 2009 season, was a young assistant coach and attended a coaching seminar featuring Vince Lombardi talking about his ‘bread and butter’ play—the ‘power sweep’.
Madden’s own words regarding that experience were: “I went in there cocky, thinking I knew everything there was to know about football and he (Lombardi) spent eight hours talking about this one play, the power sweep. He talked for four hours, took a break, and came back and talked four more.”
Upon finishing the seminar Madden said. “I realized then that I actually knew NOTHING about football.”
Question: Do you have one trade that you know so well that you could talk about it, demonstrate it, teach all of its characteristics, conditions (positive and negative), strategies and tactics, actions and reactions, behaviors, nuances, etc. for 8 hours? How about 4 hours? How about 2 hours? How about 15 minutes on 1 trade?
If you can’t—then the next question has to be—If you knew enough about your 1 or 2 favorite or best trades, i.e. your ‘bread and butter’ trades to do it, do you think your success percentage would increase?
Ted Williams is recognized as one of the most consistent and greatest hitters in baseball. Let’s explore how FOCUS played an important role in his success.
Ted Williams was an obsessive student of hitting and the ‘tool’ of his trade, his bat, a light bat weighing 33 ½ ounces compared to Babe Ruth’s 54 ounce bat. He chose that weight because it generated a faster swing.
An example of Ted William’s ability to focus: Hillerich & Bradsby, makers of the Louisville Slugger, on several occasions presented Williams with four bats weighing 34 ounces and one weighing 33 1/2 ounces and challenged him to identify the lighter bat. The result: He successfully identified the lighter bat (only 1/2 of an ounce lighter) on numerous occasions.
Going further into the characteristic of FOCUS, here’s a quote from William’s book, The Science of Hitting, wherein he talks about WHY he developed his ‘Happy Zone Chart’. “My first rule of hitting was to get a good ball to hit. I learned down to percentage points where those good balls were.”
Ted William’s Happy Zone chart. Note the red area—the zone he determined the ball had to be in to achieve his goal of being a .400 hitter or better. This chart is, in our opinion, one of the best examples of true focus in that Williams not only ‘drilled down’ to find what BAT ‘fit’ him best, but also, where the pitch had to be to qualify as a ball worth an attempted hit.
Question: To what degree do you have the ability to ‘focus’ when it comes to using your ‘trading tools’ (your trading software, your charts, and the configurations displayed on your charts)?
If you don’t—might this characteristic of ‘focus’ be something worth considering?
In our experience, questions like the ones above will help you increase your ability to see, assimilate, read, and interpret market data and potentially increase your proficiency in calculating probabilities and making more informed trading and execution decisions.
OK, a quick recap:
First, Vince Lombardi who underscores the power of FOCUS by being able to dissect and drill-down into one single play, the Power Sweep, for 8 straight hours. His achievements were many but one of the most known is his record of 5 National Football League Championships.
And, second, Ted Williams who underscores the power of FOCUS by knowing himself and his requirements as exemplified by his ‘Happy Zone’. His achievements, again were many, but probably none more than that of his multi-year .400 + batting average.
Which brings us back to the Anchor Trade concept and its three primary components and the role of your trading software:
First, we believe it must FIT you, your trading system, process, or methodology.
Second, we believe it must be based on the information and displays you need to make your highest probability, informed, trade execution decisions such as: Chart Types, Timeframes, Time – Price – Volume Information, Indicators and Oscillators, Checklists, Mind Maps, Reports, etc..
And third, we believe it must be based on displays that positively help you assimilate and interpret the information you need, your way according to your style and preferences.
Until next time . . .