WOOP WOOP – a guide to taking that step from demo to live trading

I’ve been working in and around financial markets for the best part of 30 years.

Since I first started in the Westpac Sydney dealing room in April 1988 I've met hundreds, perhaps thousands of traders.

Some of these traders have been outstanding with solid track records. Others, more workman like. And some just couldn’t make it.

Often though, then and as I’ve worked with traders over recent years, the ones who haven’t succeeded in the step from training to actual trading profitability have seemingly done so not through lack of effort, or will to succeed.

Rather they have failed because of a lack of process, a lack of a plan.  

Sometimes I feel like I’m watching the conversation between Alice and the Cheshire cat in Lewis Carroll’s tale of Wonderland:

Alice: “Which road do I take?”

Cat: “Where do you want to go?”

Alice: “I don’t know”

Cat: “Then it doesn’t matter”

Profitable trading, like anything in life, becomes more accessible with planning and a process by which the trader can achieve their goals.

Indeed it’s process, and the existence or establishment of same, which is the first port of call when I start to work with traders who I am mentoring. Usually though these traders have some level of experience so I’m working with an established infrastructure. 

But naturally, there is also a large number of people out there who have aspirations to be traders. Perhaps they don’t know where to start or perhaps they’ve taken the step and familiarised themselves via Demo Account trading and are ready to explore a Live trading environment.

While what follows is applicable to any goals readers may have in life I think it is a neat framework to help new traders transition to their goal of becoming profitable.

WOOP, WOOP!

I first stumbled upon Gabriel Oettingen, one of the co-founders of the WOOP process for better gaol achievement, via her book Rethinking Positive Thinking. In that book, Oettingen suggests that thinking positively about things we want to achieve isn’t enough. Indeed it could be counter productive.

What we need to brush these goals up against reality.

But I hadn’t thought much about her until I was listening to an NPR podcast, Hidden Brain, this week when I was driving down to AxiTrader’s office in Sydney. In conversation with host Shankar Vedantam, Oettingen discussed why thinking positively and visualiing ourselves achieving our goals may not work.

Her research showed that in a number of instances the power of positive thinking ALONE, can have negative impacts on the attainment of the goal. 

She said we all need to use her WOOP process which throws in a little bit of realistic thinking about the attainment of the goal. And I think this process will help traders of all levels, especially those transitioning from knowledge acquisition to live trading.

Let me explain.

WOOP is a process that:

  • Let’s you identify a Wish, or goal – perhaps $5,000 profit from trading over the next year;
  • Asks you to determine what the Outcome from attaining that goal would be – perhaps a holiday;
  • Makes you try to understand the Obstacle/s that are preventing you from achieving you goal – perhaps an inability to pull the trigger on trades, or fear of loss; and
  • Asks you to Plan a way to overcome your obstacle. One or more actions. – perhaps have a process of trade identification and keep a trade journal.

Combine those four steps and we get Wish, Outcome, Obstacle, Plan – WOOP.

Oettingen says that 20 years of research have proven that this approach works as it strengthens mental associations, increases energy, and drives better performance.

And isn’t that exactly what we want to achieve from our trading - better performance.

But it’s not enough to know where you want to go though. You have to have a process to get you there. Once you’ve WOOPed.

In my next article I’ll look at a process traders of all experience can use - The OODA Loop – its highlights a decision making process traders can learn from a retired Top Gun instructor.