If you’ve read a few trading psychology books, you’ll probably find that by the time you finish the book, you’re swamped with so many great concepts that you simply don’t know where to start in terms of the application to your own trading. I have made a habit of highlighting quotes as I read through a book the first time, then going back and revisiting these at a later stage. When skimming through Dr Brett Steenbarger’s books recently, I noticed that a lot of the highlighted content seems to cover the same topic which I will explore below.
Productivity & the Performance Zone
As it relates my own intraday trading, productivity is particularly important since my edge is expressed through a low expectancy per trade, but is repeated with fairly high frequency. This translates to a high workload where I am active in 11 stocks, and make around 60 order executions or amendments on an average day. Of course the order execution in and of itself is not difficult. The real struggle is in maintaining my enthusiasm and my composure throughout the day in the continuous hunt for the next A+ trade setup – this is the essence of what productivity means to my trading.
Before I explore the psychological aspects of productivity improvement, its worthwhile noting that trading is much like any other business in that the easiest productivity gains can be made by utilizing technology. Bella of SMB Capital calls this “becoming a bionic trader”. You can only see so many setups in real time, so by building custom filters and scanners you can maximize the number of A+ setups you see each day. For me, this also includes setting trade entry alerts, using block trade scanners and putting my ears to work with Trade the News squawk service and Bloomberg’s spoken headline alert function so that I don’t miss breaking news.
“Great individuals across a variety of disciplines are unusually productive. They have mastered the art of working within their performance zones, so that sustained effort becomes a desired end in itself. Their productivity is a by-product of a kind of positive addiction: a pursuit of the high of the performance zone for its own sake.” – Brett Steenbarger
The psychological aspect of productivity is much harder to nail down. As Brett suggests, productivity is a by-product of working within your performance zone. So by being more productive, we mean maximizing the time spent in this performance zone, rather than simply trading more often. Performance zones occur when we perceive that there is a chance at success in an important task, but not certainty. Under these conditions of undivided attention and enhanced cognitive bandwidth, traders process information more efficiently than they otherwise would.
“The zone is not an emotional state, though it brings feelings of emotional well-being and certainly can be disrupted by negative emotional states. Entering the zone requires immersion: a total focus on what one is doing. In that sense, the zone is a state of heightened attention: it is the result of being fully focused and involved in an activity.” – Brett Steenbarger
As most traders will know, maintaining this performance zone or ‘flow state’ at all times is near impossible. Particularly if the market is slow and not offering opportunities. During these slower periods, the goal is to preserve your energy and minimize frustration so that when the next A+ trade setup appears, you can slip into your performance zone with greater ease. This enables you to size up in the trade, manage risk and follow your plan without the burden of recency bias, having previously been chopped up in lower quality trades. Some call this “preserving emotional capital” which is a bit cheesy, but the concept is sound and should be adhered to.
On the flip side, when there are plenty of opportunities and you are fully immersed in the market action, it is easier to enter the zone. Once there, the goal is to consciously avoid trigger events that may cause a disruption to this state. So it’s worth giving this some further thought. What are the trigger events that disrupt your performance zone and how can you avoid them?
Self awareness is the key to increased productivity.