In these pages I have constantly stressed the benefits of preparation. In this series of blogs, I’ll be examining the nature of preparation and its ramifications.

Preparation begins long before a trade. It starts with identifying our:

• Fundamental values - by fundamental I mean the values that make us the unique individuals we are. Our trading approach must reflect these values if we are to achieve our full trading potential.

And

• Our sensory-input preferences - by sensory-input preferences, I mean the way we like to accept information. This characteristic goes a long way to explaining the method of trading we ultimately adopt and which will be the most successful for us.

Let me give you an example of what I mean. I have had the honour and pleasure of meeting and chatting with Dr. Brett Steenbarger (See Brett’s Blog - well worth reading). I would classify his method as digital-kinesthetic. By that I mean he processes information the ’scientific’ way - he forms a hypothesis, tests it and reforms the hypothesis with data i.e. numbers. He is kinesthetic to the extent that knowing he is right comes with a ‘feeling of rightness’.

This is not to say that Brett does not use pattern recognition; he does. But, the pattern comes from the numbers rather than charts. On the other hand, I am a visual-kinesthetic. Accordingly, I process trading information from charts and I see and recognize (feel) opportunities visually.

The same can be said for trading timeframes: our values and sensory-input dictate the optimum timeframe we should trade. Of course, other factors come into play - the most notable is the time we can devote to trading. But I view these as secondary factors.

So, this is the first stage of preparation: a self-awareness of our fundamental values and sensory-input style.

From here we next need to develop a trading philosophy. Again this will be a reflection of step 1. My own philosophy was I adapted from Trader Vic in Methods of a Wall Street Master. I loved the description the first time I read the words.

• Preservation of Capital
• Consistent Execution
• Attainment of Exceptional Returns.

From here we move onto our trading method. At this point, many start asking: “OK what pattern will you talk about?”. I believe this is the wrong question to ask. As Anthony Robbins once commented: “Asking the right question is the pathway to success”.

And the right question?

• What is the nature of markets?

Or as Dr. Brett put it in his new book:

• Why markets move and in what way are they related to one another?

Notice that despite the differences in our sensory-input styles, we adopt the same starting-point. In my Nature of Trends, after I share my beliefs about trading, I introduce the model that, for me, best describes why and how markets move (The Tubbs Model). This model, coupled with the ideas that markets are fractal, form the basis of my trading method.

So, we have covered the first two stages of Preparation. We’ll continue on Monday.

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