How to master flawless execution while trading?

Many people get confused and think that flawless execution means always selling near the high and buying near the low. It doesn’t mean that at all. No, in fact I think it will be very rare in almost all of your trades for you to buy near the low and sell near the high. You don’t need to buy the low and sell the high to make money in this business.

What flawless execution means is acting on an opportunity (either getting in or out of a trade) the moment you see that it’s an opportunity without hesitation. Unfortunately, this is a lot easier said than done. But that doesn’t mean you can’t learn to do it.

There are many good technical methods and mechanical systems out there. Even still, many people using these proven methods and systems still end up losing money. The reason is very simple, lack of flawless execution.

Again, flawless execution does not mean having the perfect trade. It means being able to act immediately on the opportunities that you see in the market. Most people think of themselves as risk takers, but what they really want is a guaranteed outcome. But there is a conflict. You can’t be a risk taker and still get guaranteed outcomes. They just don’t work together. And that is just the reason that many people hesitate when it comes time to put on a trade or cover an open position. They want the guaranteed outcome, but they realize there isn’t a guarantee, so they fail to be able to put the trade on and act in their own best inerest.

In trading, there are no guaranteed outcomes. It just doesn’t work like that. With every trade you do, you will be putting yourself, as well as your money, at risk. That is something you’ll have to learn to live with to prosper in the trading environment. There are no other options. You must learn to feel comfortable with taking risks. 

Mark Douglas, author of The Disciplined Trader, makes this comparison between gambling and trading: “As a comparison to trading, it is much easier to take risks and participate in a gambling event with a purely random outcome based on statistical probabilities simply because it’s random. What I mean is, if you risk your money on a gambling event that you know has a random outcome, then there’s no rational way you could have predicted what that outcome would be. Therefore, you don’t have to take responsibility for the outcome if it isn’t positive.” Trading is different. The future is not random. The movement of the market is determined by various traders acting on their beliefs about the future, and because traders create the future by acting on their beliefs, the result of their actions is not random.

Douglas goes on to say… “This adds an element of responsibility to trading that doesn’t exist with a purely random event and that is difficult to avoid. This higher degree of responsibility means that more of your self-esteem is at stake making it much more difficult to participate. Trading gives you all kinds of ways to beat yourself up for all the of the things you should have or could have considered that would have resulted in a more satisfying outcome.” This “beating yourself up” for what you could have done differently strongly contributes to a lack of flawless execution of your trading methods or system. It’s easy to tell yourself you should have done this or that differently no matter what the outcome was. The problem is that’s a fight you can’t win. In the trading game, you will not be perfect. So beating yourself doesn’t make a lot of sense because you’re beating yourself up for something that you really can’t change.

Now don’t get me wrong, I’m not talking about being upset with yourself for making trading mistakes (such as chasing the market, not using a stop order, taking too much risk, etc.). I’m talking about covering a position and then having the market continue your way after you’re already out of the market. It doesn’t make sense to be upset with yourself for things like that. You don’t have to be perfect to make money in this market. Please always remember that. About the only way you can get good at flawless execution is practice, practice, practice. Just like any skill, it needs to become a habit. The only way for it to become a habit is to do it a lot.

This means you basically have two choices. The first is you can set aside a certain amount of money for your education. You must make a conscious decision to execute your trades without hesitation. Remember, this is an exercise. You really can’t worry about losing the money. You must follow your rules flawlessly. The more you do, the easier it will be.

Since this is an educational exercise, I would suggest you would want to trade a smaller quantity. Thus, less of your capital will be at risk. Of course, everyone wants to make money, but you really shouldn’t worry about that right now. You need to be thinking strictly about executing your trades immediately when you see an opportunity. That is the only result you are striving for, flawless execution. It doesn’t really matter whether the trade is good or bad.

This exercise is not going to be easy, so you must be easy on yourself. The more accepting you are of your mistakes, the easier it will be for you to make the next attempt. If you make a mistake, don’t beat yourself up. Encourage yourself to try again.

I really think that is one of the biggest problems with traders. They beat themselves up so much for their mistakes it’s a wonder that most don’t have bumps and bruises after each trading day. You must take it easy on yourself. Most people are harsher on themselves than they would be on their worst enemy. All this leads to is poor trading results.

Remember, the more you get upset with yourself for your past mistakes, the more you’ll relive those mistakes and they’ll show up in your trading results. The old saying about forgiving yourself (for your mistakes) and moving on is as important in learning to trade as anywhere. I have one other suggestion on how to learn flawless execution that may be a little easier for some people to handle. This would be especially helpful for any new trader who’s still somewhat nervous about risking their money in the market.

Like I said earlier, the only way to learn flawless execution is practice. One of the best ways I know to learning flawless execution without risking real money is to use one of the “simulated brokerages/softwares.”

Basically, they all work the same way. You open a simulated account (without real money) and you place your trades just like you would with a real account. This is, by far, the best way to learn and practice flawless execution without risking real money. For a newer trader or someone who is having big problems with execution, a simulated software may be just what you need to practice flawless execution.

Again, in my opinion, a person who doesn’t want to put their money on the line, but needs to learn flawless execution, this is the way to go. Use it to  practice, practice and practice as much as you want. Because that’s what it will take for you to be successful with your execution.