Psycho cybernetics in trading….
I have given a brief introduction to visualization in one of my previous articles. I have received the following mail from a reader and just thought of answering the question about psycho -cybernetics in an article so that it will be helpful to all. Here is the screenshot of the mail.mail_visualization
Applying Psycho-Cybernetics principles in trading improves the results a lot and I have witnessed it with my own experience. If you haven’t read my previous article about visualization, read it here before proceeding further. Before going into the how to do that stuff, remember this one point. Visualization works better when you give attention to every detail of the mental movie. So, it is better to do some paperwork before actually practising it.
This is how I do it.
Visualization of the whole strategy in brief:-
Irrespective of the type of setup, this is the flow chart I follow to initiate a trade. I don’t proceed to the next step when I got stuck at one point in my analysis until it is clear.
I find the future bias.
I identify the type of setup (PB/CPB/BPB/BOF/TST)
I identify the price level to act on
I confirm weakness in price against my future bias in my setup location.
I identify the LWP, T1, T2 and risk: reward ratio of the trade.
Then I time the entry using the lower time frames.
I visualize this whole process before sitting in front of the charts. I visualize each and every minute detail of all the steps of my trade plan. Let us say, in the first step, I have just mentioned it as future bias. But there is trend identification, strength and weakness analysis and applying the 6 principles of YTC in it. Give attention to all the details in every step. But you must be thorough with the methodology you are using before visualizing that. Put it on a paper in detail and then practice it.
Visualization of the setups I use (PB/CPB/BPB/BOF/TST):-
If you aren’t consistently identifying all these setups in live, I suggest you pick one for practising visualization. Let us say, I have picked the PB trade. Then I visualize the market environment in which a PB trade is most likely, ie. healthy trend environment within structural boundaries. Then I visualize myself identifying the yellow zones. Then weak move into the yellow zone with nice rejection from it. After that, a nice retest of the extreme of that rejection where I time the entry.
Do this for all the setups. The important thing in the visualization of setups is the price interaction with the setup level. Each setup has a unique price interaction with the level. For example, in BOF, I look to trigger the entry when the price is not accepted in the new region after the breakout. But when will you say that the price is not accepted in the new region? Immediate rejection and second attempt failure, strong breakout pullback and the immediate rejection of the breakout at the second attempt, immediate rejection of the breakout into the previous region and weak retest of the level that was broken etc. Do some paperwork on different scenarios regarding the interaction with the setup level and then visualize as if you are doing that with ease by forming some mental movies.
Visualization of the Process oriented goals:-
I set a process-oriented goal every day. To be honest, for the past 6 months, I never traded a single day without a process-oriented goal. How do I set those?? Just by going through my trading journal. Suppose, if I find that I am taking too many counter-trend trades that gave bad results, I set a goal like, “I should not take CT trades within the structural boundaries at all. Even at the structural boundaries, I should take it only on clear evidence of weakness in the trend.”
Once a goal like the above one is set, I visualize the scenario where the market is teasing me to take a CT trade and I am staring at it without reacting with rock-solid discipline. You can actually form different scenarios around a single goal and visualize that.
Visualization of the Future Bias and setup:-
This must be done during trading hours. Actually, it is included as a 5th step in the process of trading. Whenever you form a future bias using the analysis of your trade plan, visualize all the scenarios of how the market can move in the direction of the future bias and what will you do in each case with the help of a set of If.. then cases. This helps in maintaining the situational awareness and pinpoint execution of the plan.
Visualization of the lessons learnt in the trading session:-
Visualize everything you find in the hindsight analysis of the session. Be it a market structure journal entry or the lessons learnt from the mistakes.
This is how I use the techniques of Psycho-Cybernetics in my trading. Trust me, it helps a lot and it makes the trading methodology as a part of your body. You can scratch the trade with ease when the market doesn’t behave as expected after your entry, you can take it with ease when you miss the opportunity.
I hope the explanation clearly gave what and how about psycho cybernetics in trading. Feel free to ask if you have any doubts.