{"id":41937,"date":"2015-08-10T11:00:59","date_gmt":"2015-08-10T15:00:59","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=41937"},"modified":"2021-05-06T16:39:31","modified_gmt":"2021-05-06T20:39:31","slug":"enhancing-trader-performance-process-vs-outcome","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/enhancing-trader-performance-process-vs-outcome","title":{"rendered":"Enhancing Trader Performance: Process Vs. Outcome"},"content":{"rendered":"

What is more important?\u00a0 The OUTCOME of a decision regardless of the PROCESS that generated it?\u00a0 Or the PROCESS applied to generate\u00a0the OUTCOME regardless of the results?<\/p>\n

The\u00a0answer can reveal the strengths and possible weaknesses of how we manage the information used to define our trading edge and the significance we place on the results of that trading edge.\u00a0 For instance, if I were to share two trader\u2019s trading results the last month and one showed a drawdown of 5% and the other a profit of 20% could we determine that the process used to generate the former\u2019s loss is flawed while the process used to generate the latter\u2019s is not?\u00a0 Does the outcome necessarily imply that a\u00a0viable process was used? \u00a0 What if the 20% was generated without a solid trading process?\u00a0 <\/span><\/p>\n

Let\u2019s say\u00a0the trader got lucky as a result of holding the\u00a0soon to expire call options\u00a0of a company that was bought out, generating a 150% options gain on a position that initially was written off as a 100% options\u00a0loser (the trader chose not to exit the trade at his initial stop loss but held on in the \u201chope\u201d that the trade would eventually work before expiration). In this case the process\u00a0was flawed, as the trader was holding a losing position before pure luck saved him.\u00a0 On the other hand, the trader who experienced\u00a0the 5% drawdown did so by following the well defined rules of his process, which is based on the probability that over time his specific trading edge will generate\u00a0consistent profits (regardless of good or bad luck). His process\u00a0factors in\u00a0the possibility of loss while acknowledging the probability of consistent gains over time (as his trading account over the last 12 months would reveal). \u00a0\u00a0<\/span><\/p>\n

J. Edward Russo and Paul J.H. Schoemaker discuss the Process vs Outcome decision making process in their book entitled WINNING DECISIONS: GETTING IT RIGHT THE FIRST TIME<\/a>.\u00a0\u00a0Russo and Schoemaker\u00a0use the following illustration to drive home the point that \u201cyour best hope for a good decision outcome is a good decision process\u201d (3).<\/span><\/p>\n

\"process<\/p>\n

As traders, we would do ourselves a great injustice if we focused more on the outcome at the expense of a well defined process.\u00a0 Might I suggest\u00a0an in depth study of the book mentioned above along with the following articles on the importance of the process?<\/span><\/p>\n

If you focus your attention and effort less on the results you\u2019re hoping for and more on the processes and techniques you use<\/a>, you will learn faster, become more successful, and be happier with the outcome.<\/u><\/u><\/span><\/p>\n

If you\u2019re committed to behavioral change in the long-term, having goals isn\u2019t enough. You have to be committed to the process of taking action<\/a> on a consistent daily basis.<\/u><\/u><\/span><\/p>\n

But investors often make the critical mistake of assuming that good outcomes are the result of a good process and that bad outcomes imply a bad process. In contrast, the best long-term performers in any probabilistic field — such\u00a0<\/span>as investing, sports-team management, and\u00a0 betting — all emphasize process over outcome<\/a>.<\/u><\/u><\/span><\/p>\n

It doesn\u2019t really matter what the methodology is<\/a>, so long as it begins with some objective input, runs through a process of sorts, and determines an output.<\/u><\/u><\/span><\/p>\n

Most investors don’t spend much time thinking about their investing process<\/a> – it all tends to be somewhat ad-hoc based on a hot tip here or a chance new idea there.<\/u><\/u><\/span><\/p>\n

If you find yourself stuck or blocked in your life in any area, look inside to see if your focus is on the outcome and on what people think of you, or if you are focused in the present moment, fully engaged in the process<\/a>.<\/u><\/u><\/span><\/p>\n

Commit to a simple process you believe in<\/a>. Hint: usually it\u2019s the simple ones that actually work.<\/span><\/p>\n

Now, let\u2019s go work on that process shall we?<\/span><\/p>\n

David Blair<\/b><\/strong><\/p>\n

THE CROSSHAIRS TRADER
\n<\/b>www.thecrosshairstrader.com<\/a><\/strong><\/p>\n

*no relevant positions
\n<\/strong><\/b><\/p>\n","protected":false},"excerpt":{"rendered":"

What is more important?\u00a0 The OUTCOME of a decision regardless of the PROCESS that generated it?\u00a0 Or the PROCESS applied to generate\u00a0the OUTCOME regardless of the results? The\u00a0answer can reveal the strengths and possible weaknesses of how we manage the information used to define our trading edge and the significance we place on the results of that trading edge.\u00a0 For … Read More<\/a><\/p>\n","protected":false},"author":290,"featured_media":41939,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1935,456,1373],"tags":[4579,1238,38,1862],"class_list":["post-41937","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-david-blair","category-trader_development","category-trading-lesson","tag-outcome","tag-process","tag-trading","tag-trading-process"],"yoast_head":"\nEnhancing Trader Performance: Process Vs. 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