Execution is truly an eternal challenge in trading, with many having suffered losses due to poor execution. Many people think that technical analysis is difficult, but in fact, forming a stable trading mindset and being able to fully execute one's trading strategy is even more challenging; this is the hardest thing in trading.
I too have suffered significant losses in trading execution, constantly making mistakes and overturning my own decisions. It was a painful process, but it also improved my resilience to setbacks and transformed me from a careless person into a disciplined and self-regulated individual.
Today, I will combine my past experiences to summarize four methods that can help improve execution and share them with you.
1. To have execution, you must first have clear trading rules.
Many people start talking about execution, feeling that they do not follow rules in their trading, always being greedy and fearful. Upon further inquiry, they realize they have never established trading rules or determined trading standards. So, how can they talk about execution?
Just as we had teachers monitoring us in school and bosses overseeing us at work, if the attendance system is not well-defined, and we act according to our own laziness at will, or if the rules are constantly changing, we will only become confused and reluctant to execute.
A common mistake people make in trading is having vague trading rules, such as "moving averages are flat" or "strong breakouts" and so on. If these vague adjectives are used as trading standards, each interpretation will be very subjective and uncertain, making poor execution inevitable.
That is why I often talk about "absolute classification in the trading system," meaning that all trading standards must be clear and explicit. If 10,000 people come to execute and get the same result, then this discipline is established.
2. Trading rules should not be too outrageous.
For a company to operate well, it must have a set of rules that run very smoothly. These rules certainly cannot be rigidly copied from some large factory, nor can they be directly taken from a small workshop and used as is. They must be verified and closely fit the company's situation in order to ensure the company's stable and long-term progress.For instance, if you are a small business with only five people, trying to replicate the management system of a Fortune 500 company is certainly not feasible.
The same principle applies in trading. Do the trading rules we set for ourselves match our psychological tolerance? Is the frequency of trading and the duration of holding positions in line with our own preferences? What kind of trading style—short-term, medium-term, or long-term—best suits our personality?
A friend once told me that his trading system was very complex, requiring a particularly intricate process to filter indicators and select signals, which he claimed had a very high success rate. However, in actual trading, it was very difficult to execute because the technology was too complex, making it hard to quickly identify the criteria for operation. Sometimes, a moment of indecision, and the opportunity has passed.
This is why when we establish trading criteria, we must consider their executability and not take things for granted.
3. Use simulated trading to test our trading strategies.
In essence, execution is a matter of mindset. If you don't believe in your own trading strategy, how can you carry it out?
The best way to understand your trading strategy is to test it. Of course, it's not advisable to use your own money to test in the live market. You can use tools such as backtesting software or simulated accounts, which are usually built into most trading platforms.
Through simulated trading, we can test the details of our trading system, including profit levels, drawdowns, holding periods, trading frequency, and the process of opening positions and placing orders. The more we test, the more confident we become in our trading strategy. With confidence, execution naturally follows.
4. Don't place trading in a position of too much importance.
Recently, everyone has been watching the Paris Olympics and noticed that many competitors are not unskilled, but rather, they take the competition too seriously, creating too much psychological pressure, which leads to frequent mistakes.In trading, the same principle applies. If our lives are solely focused on transactions or if we place too much emphasis on them, we might fall into the trap of over-analysis. We may analyze various cycles, indicators, the trends of related commodities and indices, and end up feeling very confused about how to trade effectively, not to mention the execution of trades.
The biggest factor affecting execution is psychological pressure. When our expectations for trading are too high, even a small mistake can lead to a strong sense of frustration. We may feel unwilling to accept defeat and want to quickly make up for it. At such times, if we become anxious, our ability to execute naturally diminishes.
Therefore, we can maintain stability in our main occupation, allocate some energy to managing our trading endeavors, and reduce our trading positions as well as our profit expectations. After doing so, every profit will be a pleasant surprise rather than a source of fear.
Once you've reduced the psychological pressure, you will gradually experience what stability and composure are. Trades that you could only hold for a week can now be held for half a year, and strategies that were once difficult to execute can now be maintained.
Deliberate practice plus lowering expectations is the best rule to solve the problem of execution.
