Visualizing The Trade

Before the opening bell rings, you may have clearly outlined your trading plan. You know where you will enter, and which signals will indicate the plan has gone sour. But when you try to execute the trade a few hours later, you find that you can't control your emotions. You enter, the market moves against you, and you panic. Stuck and frozen, you don't exit as you had planned. The market continues moving against you, and you lose more money than you had planned.

Rather than unnecessarily mounting losses, you can improve your performance by visualizing the trade before it happens.

Whether it's perfecting a golf stroke or improving a backswing, visualization can be used effectively to finetune a variety of skills. Many winning traders use visualization to prepare for a trade before it happens. In your mind, you can play and replay the trade. You can pretend to look at indicators on your screens and interpret the market action. You can experience the thoughts and emotions you'll feel as you watch the market action. You can allow your mind to visualize the precise movements your body makes as you click the mouse. Visualization is the next best thing to being there.

Visualization is based on the principle that a great deal of learning occurs in your mind, even if the activity is largely physical rather than mental. When playing sports, for example, it's possible to actually improve your skills by mentally rehearsing each action. Your body and mind can learn just by going through the motions mentally. You can replay an action. For example, you can pretend a tennis opponent hit a ball toward you, and you can imagine graciously returning it. You can imagine what you are thinking and feeling. You can practice over and over, and as you do, you'll sharpen your skills.

Visualization allows an athlete or a trader to prepare for how he or she might react to different scenarios. A trader can imagine what it feels like to execute a trade when the market is going against him or her, for example. You can pretend it is happening and feel the initial disappointment you might have. But rather than act impulsively, you can visualize acting calmly, and closing out the position. In the heat of the moment, without practice, you may be stunned and paralyzed. With visualization, in contrast, you can practice what you would do over and over again.

You can practice monitoring your internal dialog. You can practice thinking, "The loss is no big deal. I've used risk management to cover the loss. Losses are an everyday event when you're a trader. I'll just stay calm and follow my trading plan." It helps to practice a stressful trading event in your mind before it happens. You'll learn to control your muscles, your thinking, and your emotions. Why try to practice this complicated set of actions during the trading day when all you do is choke? Do it off hours to prepare for the trading day. By using visualization, you can improve your trading skills during off hours until you trade calmly, decisively, and profitably.

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