We are at the end of the process. In this blog, I’ll complete phases ‘Enacting’, ‘Embodying’ and ‘Performing’. It’s worth taking a moment to review how we arrived at this juncture:
- We started with a clean slate, shedding preconceptions and allowing the data to shape a picture of the market’s possible future direction.
- We then subjected the tentative conclusions to a left-brain analysis that resulted in a further refining of the ideas.
- The next phase involved creating raw benchmarks and signposts that would either argue against the ideas formed and/or arrive at a set of benchmarks that would indicate the ideas were going astray.
In the ‘Enacting Phase’, we filter the benchmarks etc and choose the ones that are most likely to be of use. The ‘Letting Come’ provides the raw ideas that come from brainstorming; the ‘enacting phase’ defines the ideas down to the most useful. Still in the ‘enacting phase’, I then create my scenarios. I use a version of Scenario Planning, (see http://www.well.com/~mb/scenario_planning/ for a description and set of tools) to create to prepare my evolving trade. One main difference with my approach and traditional scenario planning is I prefer to use mindmaps rather than stories to create my futures.
I create three scenarios: ‘up’, ‘down’ and sideways’. The great thing about trading is the market can do only one of those three things - of course the scope of its action within them is unlimited!
With the scenarios completed, we come to the ‘Embodying Phase’. In this phase, I adopt two left-brain techniques to come up with a choice based on the most probable scenario.
- I subject the scenarios to the matrix found in the Psychology of Intelligence Analysis and
- I create a decision-tree analysis for the scenarios.
Both should come up with the same scenario as being the optimal choice. Finally in this phase, I run over the basics:
- Entry and Initial Stop
- Target
- Reward to Risk
- Ensure that all come within my trading rules.
I am now ready to ‘Perform’: this involves a visualization ritual. I ’see’ myself executing my plan flawlessly and being in the centre of any storm created by unexpected events. No one can prepare for all the eventualities the market can throw at us - that is something beyond our control; what is within our control is our ability to remain calm and confident amidst turbulence.
After that, all that is left is the implementation of the entry and exit plans.
Well there you have it. Theory U created an improved framework for my decisions - I hope you find it equally helpful.
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