In case you have read my article on Pareto charts this will most likely make more sense to you.
Root trigger evaluation is another tool that traders could benefit from. I know that some of these things do not seem dealing related, but you can improve results with them. When all is said and done results are what matter anyway.
On your pareto chart you have identified weaknesses in your dealing style. Root trigger evaluation is how you begin to fix them.
Very first we need to identify the most prominant cause of failed trades. Once this really is identified you will need to write it at the top of a separate sheet of paper. Below this you will ask a question. What caused this reaction? Then you list the answer. Now ask yourself the same factor about this new answer. List it. You’ll continue to ask yourself this for each new answer, until you can not come up with an answer. Generally, you’ll only be able to go about 3-5 levels deep. That is your root cause. This is the start from the path that leads to the losing buy and sell.
When you have reached the root trigger you have one more question. How do I steer clear of this root trouble.
If it can be a emotional trouble maybe, you have to work to become more self aware of the feeling that starts a process of bad decisions. When this feeling starts to erupt, just exit your positions and and stop trading for the day. It is better not to buy and sell, than buy and sell and lose.
If the issue is psychological, maybe you need to discover a routine that works for you.
A good example of that is a baseball pitcher. A major league pitcher has all the physical requirements, or he would not be inside the majors. Some pitchers have been known for having quirky routines they go through on each pitch. You can find some pitchers who have had terrible seasons simply because they lost something in their routine. Their physical attributes have not changed, only their mindset. Their routine is only psychological, but the results of it being off are all to real.
Of course, if it ends up being the system the fix is obvious, scrap it.
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