Skill is defined by Miriam-Webster Dictionary as…

1a: the ability to use one’s knowledge effectively and readily in execution or performance
b: dexterity or coordination especially in the execution of learned physical tasks
2: a learned power of doing something competently: a developed aptitude or ability

As such, skill is an obvious requirement to succeed at any endeavor.  However, there are any number of ways to develop skill levels; and not all of them are created equal.  So, to clarify what we mean here consider this formula: SK (P + ER + FL + HH) = Skill Building.  To be sure, this is not the only example of how to grow skill levels; but it is an extremely effective one as we look at skill through the prism of trading.

Formula for skill building

Let’s begin at the beginning … SK represents specialized knowledge.  Specialized knowledge starts with the foundational lessons taught in Core Strategy having to do with order flow which drives price action and creates imbalances in supply and demand.  These imbalances are what establish the probability that either buying or selling will lead to profit or loss.  The power of the Core Strategy lies in the advantage or edge that it provides to the trader who embraces and becomes intimate with these principles.  They don’t guarantee a profit any more than using a particular platform/broker will guarantee profit. What a credible edge does is that it increases the probability that the process/edge, if used consistently, will lead to positive results.

The SK is applied to the other four variables inside the parenthesis beginning with P which stands for Protocol.  Protocol has a number of definitions that relate to disciplines as disparate as diplomacy and politics to medicine and scientific inquiry.  The definition that we use for traders and trading is … a series of sequentially ordered steps toward an aim or goal.   This way of looking at process relates directly to the notion of Core Strategy as the edge or advantage that makes such a huge difference.  The steps referenced here are those that lead to the Odds Enhancer calculation; things like the identification of zones, where on the curve is the zone appearing, time frames and trends.  The category includes items such as set-ups, procedures, rules, and strategies.

Added to protocols are ER or Effective Routines.  As most if not all Online Trading Academy instructor/traders will tell you, having a routine is critical to your trading.  Here we go a little further to identify what the trader needs to do to support overall positions…and, of course, support the trader’s ability to write the plan and trade the plan, looking for where ever the sun might be shining as they works the routine to increase their effectiveness, which is the bottom line here.

Through this training, the goal is to process the information in the context of probability.  Traders will want to ensure that their trades are following the rules…their rules.  As well, a trader’s routines should be designed to support positive behaviors, allowing them to become consistent; because these often-small details work best when they are used to not only focus on what matters most in this trade but to promote overall effectiveness.  Traders who are bouncing off the walls and only concerned with profit but not how they get the profit are not trading with purpose…and you are likely not getting the results they want.  Consistent behavior that is supported by Effective Routines will uncover what is not working and allow traders to successfully address the issues.

The next formula item that is caught up in the middle of trading patterns is FL or Feedback Loop.  A Feedback Loop is a means of evaluating the trading process which will strongly help traders to pay attention to what is happening or just happened in the trade.  By using the power of introspection and self-reflection, it is possible to break down whether or not this further analysis is needed.  Traders can devise questions designed to uncover simple clues, thereby becoming more critically flexible and enhancing their ability to evaluate whether or not they are getting the hit-rate in their trading that they anticipated. Tracking and evaluating trades supplies the information needed to measure, verify and document what transpired…giving details on all of the bad and some of the good in concise and tight bullet points.  Revisiting this information on a regular basis will provide more and more insight into the how of each trade and also what changes need to be made. This often-detailed information is could propel a trader into the consistent column over time.

The last variable happens to be HH which means Habituation and Habit Formation.  Habituation is loosely defined as becoming used to something happening.  In other words, the more a stimulus is presented the less the individual responds.  This is a good thing because as individuals work with these thought/behavior variables, the more their physiology will not only become acclimated to them, it will become easier and easier to follow  through.  Additionally, the more that they trade using all of these variables the more they will develop new habits which are the coin of getting good and powerful results.

Once traders begin using this formula consistently, they will find that getting into a skill building orientation becomes easier and easier.  They will understand with greater clarity the importance of bringing disciplined skill building to every aspect of the trade.

Sourced from Online Trading Academy