A breakthrough
Why developing a process to any endeavor is important.
To begin,
Today I’m going to highlight a video that was really pivotal to my trading journey, as it opened a new perspective for me in terms the psychological troubles I was having through the first 2 years of my trading.
Long story short, this video is an interview with trader Pradeep Bonde, also known as
”Stockbee” on X. The interview contains lots of great info, but more specifically I want to highlight what resonated and helped me the most. The timestamp starts at minute 3:28. He brought up a concept I never really thought of in the context of trading. He touches on developing a “procedural memory”. He defines it as a type of long-term, implicit memory that enables you to automatically perform learned skills and actions-like riding a bike, typing, or playing an instrument-without consciously thinking about the steps involved. The key is to not consciously be thinking about the steps involved, because I’ve come to realize that the more I think in depth about my trading, specifically my execution, the less money I make.
Mind you, around this time I was still trying to develop a solid system. I would tweak things here and there, never sticking to one approach, failing to get a large enough sample size, and then trying to interpret the results based on incomplete data before finalizing my system. At the time, I didn’t understand this concept. I think that because of my lack of understanding of procedural memory, I experienced a lot of psychological breakdowns-such as revenge trading, overtrading, and overleveraging.
He implies the following:
If you have a system and follow it enough times, you begin to develop trust in it, and eventually, executing your system becomes unconscious. For example, we all know there’s a risk when getting behind the wheel of a car. But after you’ve driven enough times and developed procedural memory, you naturally offset the possibility of putting yourself in danger through experience, and keeping yourself out of harm’s way becomes an unconscious process.
Once you learn it, you never forget it. Good traders don’t hesitate on decisions, they don’t think they just execute. “I can buy 2,000 shares of “ABCD” stock and I won’t even think about it”
Focus on one setup. He says the problem with new traders is that they’re never just focused on one setup, and in the process they never fully develop procedural memory, therefore hindering performance. He claims that developing procedural memory can just take a few weeks he mentions “How long does it take for kids nowadays to learn how to drive? 6 weeks maybe?”
From that point on, a lightbulb went off in my head, and I discovered what was wrong with my trading. I wasn’t developing a system that I could grow to trust-one that I had executed so many times that I no longer had to think about the steps consciously. Since then, that concept has changed my trading tremendously.
In the business world, a similar concept is used called “standard operating procedures” or “SOPs.” Essentially, these are written steps for performing any given task within a business. In my case, I developed SOPs for my trading, scanning, and journaling processes. The key is that everything is written in layman’s terms, so that even someone who has never traded before could likely read my trading SOPs and, at the very least, execute a trade, scan for a setup, or journal their trades.
For anyone out there struggling, or just looking to further develop their system in need of a SOP reference here’s an example using mine.
As you can see, one would probably think opening your scanning platform would be a given, but I’ve written down the steps so that anyone for the most part, whos never once used a stock scanning platform before, can more than likely read this and at least get through the steps in a reasonable time.
This alone here, really set me off on the right path. As I stated before and many times in my journal, the more I think about my execution through buying or selling positions and stray away from my system, the less money I make.
And to conclude,
that’s why I think developing a process in any endeavor is essential. Humans are irrational and emotional. We don’t always make logical decisions, and specifically in the business of trading, you need to be at your best mentally, quick decisions need to be made on the fly, a lot of that comes with experience of course. But if I were to give Javier advice two years ago when he was just starting out, I’d tell him to find 1 setup, master it, make it a process, adhere to risk management, and scale it to the moon. Remove the conscious thinking as soon as possible.