Good Traders Focus on Results, Great Traders Focus on Processes.

I recently came across an article called ‘Ordinary People Focus on the Outcome.Extraordinary People Focus on the Process.’

The article told the story of actor Bryan Cranston who, in his autobiography, described the lessons he learned that helped him go from being an average actor to becoming an extraordinary one.

Cranston wrote how he was inspired by a mentor to focus on the process rather than trying to win auditions. Until then his emphasis was purely on winning, and at this point he was winning mostly small bit part roles.

The mindset shift which resulted in a process orientation was subtle. He started focusing on what he needed to do to win, rather than focusing on winning itself. This led to Cranston starting to land bigger roles, and eventually the career defining roles which has made him one of the world’s most sought-after actors.

Trading - Extraordinary Performance

As a coach I work with many outstanding traders across a variety of trading business. Occasionally I come across someone I categorise as truly exceptional. One such trader who springs to mind is an individual who is completely process focused. He is not driven by winning or by his results, but by developing, refining and sharpening his process.

Winning is important, but not as important as correctly doing the things that enable him to win. As a result, he does not consider a loss a failure if the process was right. For him, failure is defined by whether he considers his process was good and that he stuck to the principles of his process.

This is a defining characteristic of the process focused. In contrast, the results focused individual defines success by the outcome. The danger of this is that in a world where the outcome owes a lot to luck and randomness, traders can end up relying on flawed processes.

An example to emphasise this.

Imagine you bet $1 dollar on an outcome of an event which had a 10% probability of success and the payoff was 15 times the $1 investment.

Say the event was the spin of a wheel numbered 1 to 10. Let us say the number 6 paid out 15 times the bet. Whilst all other numbers paid 9 times the bet.

A sane person would presumably bet on number 6 every time as this would have a positive expectancy. For every 100 spins one would expect 10 wins of $15. Thus, they would expect a return of $150 against a total $100 investment.

You will of course not win 90% of the time which may try your patience. Also, as a result of randomness it is possible you may lose more than you win until enough spins have occurred for randomness to start evening itself out.

The risk for an outcome focused person playing this game is changing their process due to the witnessed outcomes. If they went through some relatively barren periods, they may start to lose faith in their processes.

Perhaps say the number 7 starts coming up seemingly far more regularly, and separately they buy into the myth of lucky number 7. As a result, they decide to start placing bets on number 7 even though they have been told this is completely random. They will have been led by a focus on outcomes and ‘fooled by randomness’.

We see similar occurrence play out often in trading situations where a trader abandons their process and adopts the trades of a colleague on a good run. The trader is seeing someone else succeed and starts copying their choices.  

The danger here is the trader now no longer has any process other than mimicking somebody else’s trades. This situation is far more common than many people realise.

Process, Process, Process.

The same is true of financial market businesses as it of people. A couple of weeks I published an article on Ray Dalio and Bridgewater Associates, and how their success owes a great debt to creating a ‘Behavioural Edge’.

A key part of their success is their culture and the way they behave within that. Bridgewater work incredibly hard to ensure they are always trying to improve and enhance the behavioural aspects of how they work and function. In other words, their focus is on their process.

If the process is right, then good outcomes should follow. - It is all about the process.

Steven Goldstein is a leading coach who helps people, teams, leaders and businesses in the financial markets to cultivate better and stronger performance. Steven has a rare and unique set of skills having worked as a coach since 2009 and having been a trader for over 20 years at some of the world’s leading investment banks.

At Alpha R Cubed we work with people and businesses in the financial markets to help them explore how they could help improve and develop behaviour to catalyse stronger and more effective performance. If you are curious about how we could help you or your business, please email us at info@alpharcubed.com. or call +44 (0)7753 446097.