THE MAIN IDEA OF THE PRIMESYSTEM
Irrespective of whether or not you believe in specific
strategies
in
trading,
there
are
some
aspects
of
trading doing well which many new traders haven't yet
picked up on. As a trader, you need to do extensive
planning before attempting to execute a trade. Because
what is even more important than anything else is a
systematic
journaling
and
optimization
process.
It's
essential, as afterwards, you have to figure out what
was good or bad. In this way, you will gather practical
information, which can we use to optimize your trading
strategy and do better in general. Planning, journaling
and optimizing are areas where many traders fail to be
efficient. That is often the reason why their capital
is gone before they even create a (proven) strategy. It
requires work. And nowadays nobody is willing to invest
energy and time into making something work. People are
chasing
instant
gratification
and
quick
happiness.
Trading is a marathon and not a sprint, frame your
expectations right and look at your successes over the
timespan of years. A system tells you what to do and
when to do it, if you document your actions, thoughts,
and
emotions
accurately
and
consistently,
you
are
building data which you can use to analyze and optimize
your trading results to identify weaknesses and improve
where it matters to gain clarity about the impact of
your actions.
Long-term success can be planned, and the PrimeSystem
is all about generating predictable results over and
over again.
But it requires a few elements to be in place:
• Visualization of the future outcome
• Strategic Approach
• Discipline
• Trading Plan
• Execution
• Journal
• Post-Analysis
The
PrimeSystem
using
the
was
process
developed
of
trial
over
and
years
error.
of
testing
Greed,
bad
trades, and high-risk flipping have cost me uncountable
amounts of money and pain. The PrimeSystem has become
the theme of this book because I want to show that from
'failure'
something
positive
and
outstanding
can
happen. And now a few years later many more people,
than
just
me,
are
benefitting
from
my
previous
'failures'. I can share this knowledge to help you. And
hopefully, you will also share it with someone else who
also needs a strict system like this. As trading became
so popular, it is an absolute necessity to train people
how
to
execute
according
to
a
system.
In
no
other
profession, we are so close to our wins and losses.
Where we risk our hard-earned money. Put the thought in
it,
study
it
and
dedicate
your
life
to
absolute
accuracy and effectiveness. The PrimeSystem is an easy,
simple
and
repeatable
process
that
improves
strategy, awareness, journaling and optimization.
your
ELEMENT #1 - INTRODUCTION
To execute the PrimeSystem at an individual level, it
is very important to do so consistently at a highly
organized level, which requires strict discipline. You
need
to
be
your
own
boss
who
will
systematically
specify the following key parameters:
1) Visualization of the future outcome - What goals are
you trying to achieve and what is the exact scenario
you
want
to
have
in
the
future?
This
seems
at
the
beginning pretty simple. Later on, it will be part of
your
natural
personality.
But
for
those
who
are
inexperienced with their personal development need to
understand that this is important. You need to be aware
of the purpose in your actions and where those can lead
you.
Where
ultimately
avenues?
do
you
want
to
want
to
expand
be
into
in
2
years?
different
Do
you
business
2) Strategy – You need to act according to pre-written
rules. A precise blueprint, which could theoretically
be converted into code and a computer, would act in the
same way as you. Of course, as professional traders, we
have
some
more
judgment,
and
our
own
perception
is
heavily involved. This specific skill will grow with
weeks,
months
and
years
in
front
of
the
charts.
Unconscious competence needs endless hours in front of
the charts to develop.
3) Intent – What is the reasoning behind your preferred
strategy? What approach are you specifically following?
Why do you think that Strategy X might be better than
Strategy Y? Rethink your biased thinking. Try to be
rational
and
open-minded.
Many
new
traders,
for
example, think that "quick and big" profits come from
scalping, for whatever reason, but from the standpoint
of "not knowing how things work". Furthermore, scalping
is very attractive but rarely the best choice for new
traders as it could lead you down a spiral into running
after
instant
positions.
gratification
with
over-leveraged
Overall,
the
more
work
you
put
into
your
planning
process, the better you will be able to execute it in
your daily life. The data you collect enables you to
have a better optimization process and system.
Visualization of the future outcome
Every
trading
business
should
be
built
on
a
system
which is in your favour. If, however, the plans and
goals are too unrealistic, it can end up diluting the
impact of whatever is executed. It is, therefore, your
job to develop a clear and concise description of the
future that you would like to achieve.
A
good
trader
will
find
a
way
to
paint
a
high-
resolution picture, which is compelling and alluring
enough
to
motivate
you
through
the
harsh
learning
process. Trader personalities are usually very good at
being able to visualize. Because they often come from
nothing or they just left a profession to rise from
zero in trading. They can see where they want to end up
and
they
paint
a
highly
textured
description,
which
even others can relate to.
You need to walk with confidence on the right track. In
this step, we don't try to micromanage the process by
specifying
specific
vital
points.
visualization to be like an action plan.
We
need
our
An
effective
future
picture
for
your
trading
career
will be tightly focused and richly detailed. It will
cover some key points:
• Your
future
financial
position
–
in
terms
of
account size, lifestyle, financial freedom
• Your future market position – will people know you
for your skills? Will you get recognition?
• Your areas of operation – Will you trade your own
capital only? Will you be involved with account
management?
• Your approach to innovation – Will you try to share
your knowledge with others? Will you teach? Will
you develop software solutions for traders?
• Outsider
perceptions
–
how
is
viewed by the broader community.
your
organization
Great
traders
blend
these
critical
elements
into
a
detailed picture of what they want their business to
become
in
the
dramatically
future.
different
Sometimes
future
this
vision,
will
and
at
be
a
other
times this will simply be an enhancement and refinement
of what already exists. This is the starting point for
the
PrimeSystem
and
the
core
to
understanding
your
model. Define your goals as a trader. Those must be
daily, monthly and yearly goals. The daily goals you
make should accumulate to form that annual goal. It
will give you a sense of direction and purpose in your
trading. The daily goals should be explicitly focused
on your trading. The monthly and yearly goals should
focus on how you will take your trading to the next
level
or
different
how
you
avenues.
will
invest
the
money
These
goals
must
be
made
specific
into
and
intentional. There is no point having a list of goals,
which are vague and are not realistic. You must intend
to accomplish them. These goals must define who you are
and what your trading style is.
The reason for the PrimeSystem is not because we want
to do things so well that you smoke other traders. It
also doesn't mean your opponent is going to roll over.
The PrimeSystem is all about expecting things to go
wrong – and handling it. In aviation terms, I had a
model, a method, and a repeatable process that kept me
alive. That's Prime. I might lose a few points on the
way to winning the game, but I win more than I lose.
Strategy
The term "strategy" has a vast array of meanings in
trading. From a prime system perspective, a strategy
acts
as
the
connective
tissue
between
the
future
picture articulated by you and the individual plans you
will develop and then execute.
In simple terms, strategy means to answer three key
questions:
• What am I going to be in the future as a trader?
• What resources do I have to get there?
• How am I going to do this?
The strategy is an aspect of trading which makes a huge
difference.
A
trader
with
the
best
strategy
can
prevail, even in bad market cycles. The key to crafting
a
great
strategy
is
to
identify
the
"centres
of
gravity" – the critical leverage points where if you
apply pressure, you get the most bang for your buck. To
change a system, all you have to change is its centre
of gravity. To amplify the effectiveness of what you're
doing, attempt to change multiple centres of gravity
simultaneously.
How does this work in practice?
Consider the introduction of the iPod. Apple Computer
identified
two
key
centres
of
gravity
for
the
commercial success of this device: Apple convinced the
music industry to license their songs for downloading
to a secure fee-based Web site Apple controlled. This
turned
pirated
revenue
stream
designed
a
digital
for
copies
the
device,
of
record
which
music
into
industry.
looked
more
a
Apple
like
new
also
something
consumers would want to use, and less like something,
only
a
computer
geek
would
like
to
keep
in
their
pocket. They turned the iPod into a must-have fashion
item. By attacking both these centres of gravity at the
same
time,
Apple
managed
to
create
a
new
market
segment, which they could then control and dominate.
They were smart enough to pull this off whereas other
pioneers
in
digital
jukeboxes
fell
by
the
wayside.
Apple is now licensing its iPod technology to others."
They then let the people who have to execute at the
customer
level
everything
go
involved
to
work
with
a
full
rather
than
just
picture
their
of
narrow
specialist area of expertise. It is always essential to
understand the world of business and the practicalities
of it as trading itself is a business. Not only that,
but trading is also a gateway to invest in companies
with the money made as well as the creation of your own
business and investments in other assets.
Some good open planning rules-of-thumb are:
• Create an environment for yourself where your ideas
are recognizable for yourself and easy to remember
or see on a laptop or handwritten notes.
• Focus only on executing the strategy. Keep in mind
that
you're
responsible
for
developing
your
strategy once you have a good understanding of the
overall basics.
The last key point you should openly plan is your exit
strategy. Products and services typically have a life
cycle. You have to plan what milestones will trigger
specific
organizational
responses.
Your
exit
may
consist of actually leaving the business, or you may
choose to introduce a line extension to breath new life
into your established brand. Determine how and where
you will finish. This is with regards to the long-term
goal of trading. What is your ultimate goal to achieve
in life through trading? It is extremely important to
establish that sense of direction within your trading
rather than having no clue as to where you want to
head. You may plan that after earning a certain amount
of money through trading, you may exit the profession
and focus on other things. It may be you want to trade
for
the
rest
of
your
life!
It
is
important
not
to
ignore these long term issues as they will shape the
trader you are.
A great quote to always look to, in order to remind
yourself of what trading is all about is one by James
Murphy. It goes as follows: "Great trading strategies
are
built
around
extraordinary
individual
execution;
the better the individual executes, the better the plan
performs. Take sales as an example. If an individual
improves its closing rates, the company benefits with
higher
revenues
commission
check).
contributes
the
(and
to
company
the
In
the
salesperson
production,
overall
becomes
more
gets
if
an
manufacturing
profitable
a
fatter
individual
efficiency,
through
reduced
costs. It's all very circular, but it begins with how
well an individual executes. But individuals rarely act
alone. Individuals are invariably part of a team; men
and women invariably work in groups. The goal of the
individual is to execute flawlessly. This achieves the
aims of the group – a flawless mission. When you do
this
over
and
over
again,
exceptional
performance
accelerates the evolution of the company." Trading can
often feel like a one-person job, but you may decide to
surround yourself with a business team. There is so
much value in working with others headed in the same
direction
as
you.
It
allows
for
contributions
opinions to circulate and ideas to grow.
and
ELEMENT #2: EXECUTION
More than anything else, the PrimeSystem is designed to
accelerate the path to your proven strategy. This is so
that you can execute a perfectly balanced and proven
strategy as soon as possible.
This topic has four steps:
• Plan – Take the strategy and develop the tactics,
which will accomplish the desired effect.
• Execute – Get out and use the tools provided.
• Journal - Track what went your way and what did
not.
• Optimize
-
Analyze
your
important optimization
journal
and
search
for
You're planning how to win again and again using the
benefit of all the data gathered thus far. This is a
continuous
process,
which
keeps
going
over
and
over
again, week by week as you collect more and more data.
"This is the heart of the PrimeSystem. This is how you
always
have
an
advantage
compared
to
other
market
participants who do not act according to that.
In this element, objectives must be:
• Clear
• Measurable
• Achievable
• Specified down to the finest detail
• Flexible
–
conditions
so
they
can
be
adapted
to
changing
PLAN
Before you expect anything worthwhile to be achieved,
you have to sit down and plan things out thoroughly. It
will allow you to anticipate what will happen as you
attempt to execute and put in place the assets you will
require.
Ideally,
this
will
allow
you
to
be
100%
prepared for events way before they even occur. And if
they don't occur at least, you have been prepared. It
just means that you can avoid big surprises and empower
yourself
to
trade
with
a
high
level
of
confidence.
That, in turn, means that you will be able to adjust
your action to any market behaviour. The whole point is
to be able to adapt to the market and trade what the
market gives you, not what you want the market to do.
Planning
effectively
also
requires
that
you
set
achievable and realistic tasks. If what you ask for is
impossible even with stretching and doing everything
conceivable,
you
degrade
your
motivation,
abilities,
energy and enthusiasm. And most of the time traders
don't even know what is achievable with the compound
interest
effect.
You
want
yourself
to
be
determined
about winning in the long term, and that will only
happen
if
objectives,
you
have
which
clear,
clearly
measurable
integrate
and
with
achievable
the
bigger
picture.
In order to plan thoroughly, there are six steps, which
are essential to recognize:
• Specify
your
trading
objective
–
in
razor-sharp
detail. Your trading objective will be something
you can go out and do today rather than a future
goal. It has to be clear, quantifiable, achievable
and aligned with the future picture.
• Identify all potential threats to achievement – all
the internal and external barriers that may stand
between you and your objective. Your most apparent
external threat will be you. Sounds weird but it is
true. People sabotage themselves all the time, but
there may also be numerous indirect influences. Get
to know your weaknesses and accept them. Work your
way around. Watch out for complacency, indifference
or
apathy
in
your
organization
as
well
as
the
impending arrival of disruptive technologies. Make
it your business to be well informed about anything
and everything. Prioritize your threats and have
some ideas on how to deal with them.
• Catalogue your available resources – know in detail
what personal support you have available to use.
This
will
usually
be
skills,
money,
systems,
technologies, experience, time and so forth. Get to
know
yourself
even
more.
Because
this
is
what
trading is: getting to know yourself. Be aware of
your thoughts and know the ins and outs of your
mind. If at all possible, try matching each of your
potential
threats
with
a
resource,
which
will
negate or at least offset the threat's impact. Get
to know the market and watch it close.
• Tap into the experiences of others in trading who
have been in similar situations – and see whether
they have some useful tips you should be using.
Most of the time, this is not the case, at least
not on social media. So that is what I'm for here.
This may be something as simple as advising you to
never use more than 2% risk. Or it may be something
like never execute a trade before the market close
on a Friday. Search out the practical lessons other
people have already learned and take advantage of
this kind of information. Or in other words: Read
every sentence very close and try to think what I
want you to think. And consider.
• Develop a strategy of potential courses of action.
So you can respond to conditions as they unfold
intelligently.
Try
and
ideas/plans,
not
just
outspoken.
Have
them
get
the
those
look
best
knowledge/
people
at
your
who
are
project
logically, and think what could beat you. Test it
and analyze again what happened. It will uncover
weaknesses that you didn't even realize existed,
and you only optimize what has a gap, not something
that is possibly working. Without a plan/journal/
post
analysis,
you
can't
know
what
tactics
are
working and what is not. But with a system, you can
then
address
these
issues
before
they
become
critical.
• Plan for contingencies – or in other words, inject
some flexibility into your planning. Assume things
will go wrong when you try to execute. Ask all the
problematic "What if?" questions. And go by the
approach of IF and THEN. "IF this happens THEN I'm
going to do this." Brainstorm how you will respond
now
before
the
pressure
comes
on.
Think
things
through in advance so if that situation arises when
you're
trying
immediately
happen
if
and
a
to
execute,
positively.
highly
you
can
Consider
unlikely
sequence
respond
what
would
of
events
actually occurred and plan accordingly. Develop a
scripted
contingency
plan
so
you
can
respond
quickly. Be realistic and recognize bad things can
happen at any time, and it's up to you to have
thought things through in advance.
EXECUTE
Many smart business men already have found out that the
biggest stumbling block to productive execution is task
saturation – having too much to do and not enough time,
resources or tools. In this era of layoffs and other
structural changes, many people wear task saturation
almost as if it were a badge of honour.
The three general responses to task saturation are:
• Shut down, stop working and take a break.
• Start making and rewriting lists rather than doing
things.
• Become
intensely
focused
on
just
one
thing
and
ignore all else.
All three of these responses are potential problems for
your routine. A better approach is to build into your
business
the
three
processes
traders
use
to
keep
themselves on track and focused:
A trader, regardless if they are a scalper or swing
trader must develop some checklists, even if they are
just
repetitive
business-as-usual
items.
Just
going
through a checklist and making sure you haven't missed
out anything obvious. This lowers stress and increases
your ability to execute. Find your trading choke points
and build in some checklists to help yourself go to
through that.
Secondly having some crosschecks is essential, meaning,
keep a close eye on your numbers. Get information on
how
your
information
trades
to
are
your
doing
overall
and
goal
then
to
relate
create
that
aligned
capital growth.
Search for mutual support by joining a community or
getting a buddy system in place where you can have a
person that is a mentor or partner who can assist. Have
a checklist everyone uses to stay on point.
Journal
This is a technique, which is popular but rarely done
right. The essence of a debrief is to evaluate what
went right and what went wrong so the next time the
same project is executed, the organization can do it
better. A debrief is all about improving skills and
getting better rather than who was right and who was
wrong. In the PrimeSystem model, journaling is the most
crucial step of all. It's even more important than the
execution
step
because
learning
process
and
it
the
is
the
catalyst
foundation
to
for
the
future
optimization, which will create a proven strategy.
A good journal requires smart key facts, which can give
you a reliable result. Defuse your ego and learn how to
be self-aware of the things you do. It can be hard, but
it will be something you have to learn. You must leave
your ego before entering into the charts. This will
remove
any
bias
or
unrealistic
confidence
you
have.
Remember, your job is to trade what is given to you,
not what you feel you want to happen.
A
useful
journal
will
contain
various
elements.
Therefore it is important to mention one of the most
important aspects of a trading journal:
Make sure that the journaling process happens either
directly after the trade was closed or after a trading
week
on
the
weekend
when
the
information
is
still
fresh.
There are many subtopics to this, and many questions
one must ask during the trading process. Was the target
set beforehand? Was it too easy to reach? You must
always
be
pushing
to
reach
new
targets
within
your
trading but being realistic at the same time. If you
notice that you are continually hitting your target,
write down new goals and new objectives. Errors will
happen. But with errors or failures, you will become a
more refined trader. Ask yourself: How can you avoid
the errors you made? Were those errors made because of
your psychology or lack of backtesting? What can you do
differently, and what data do you require to evaluate
that result? Basically what you should care about is
what did you do right and wrong and how can you improve
on that. Analyze the data and find the root cause for
everything that went wrong. The root cause will always
a
big,
systemic
item
rather
than
a
small
error
of
judgment. The root cause will most often be a problem
of:
• The approach of trading was not fully understood
• A chain of events
• No real intention of succeeding
• Misunderstandings
• Lack of discipline
Look for patterns in the root causes, step back and
find those, which have cropped up again and again. If
there is one cause common to several problems, you then
come up with a viable fix. Lesson learned. If this
lesson
is
then
disseminated,
future
issues
can
be
avoided. The lesson learned could be turned into a new
process, which, when implemented, helps you're trading
become more consistent.
The learned lessons can also be picked up on by others
and acted upon quickly and decisively. None of this
happens just by accident but by doing out journaling
and post-analysis. This is something that you have to
do.
I'm
trying
massively.
to
highlight
it
here
in
this
case
Many traders choose not to journal, and that is why
many, in the long run, will end up failing. If you
don't have any objective rules to follow or no system
in place, you fail to plan. Therefore you are planning
to
fail.
For
example,
a
big
part
of
trading
is
basically about managing your emotions well, and that
is why I always highlight trading psychology here as
well. Because it is normal for the unskilled person to
fail,
and
during
you
moments
probably
of
top
tend
to
emotional
make
bad
peaks.
decisions
Think
about
stressful situations or the number one reason people
fail in business. They are untrained, and 99% of all
people would fail in these kinds of a situation if they
are untrained. Setbacks are normal, and so are losses
in trading, and they should not be seen as something
negative as they are the stepping-stones to winning as
part
of
the
confident,
overall
and
we
do
system.
not
That's
need
to
why
be
we
can
anxious
be
about
executing our plan. Therefore, we reduce emotionally
triggered bad decisions greatly. We know what we are
risking, and we know what we are targeting for, and we
know it's all about odds and consistency.
ELEMENT #3: FOUNDATION
No execution plan is ever perfect when it is first
conceived. When an execution plan breaks down or has to
be adapted due to changing market conditions, you have
to rely on the three basic elements, which form the
foundation of the PrimeSystem:
•Standards
–
Your
implicit
and
explicit
organizational expectations of what is acceptable
and what's not. What have you got in place, which
defines your trading style?
• Training – Which is ongoing and consistent with
meeting the demands of a fast-changing world. How
are you preparing yourself to meet the requirements
of the market and the fast-moving aspect of it?
• People – Getting the right people involved in the
organization
in
the
first
place.
Concerning
trading, this can mean ensuring you are the right
candidate for the job and fulfilling what it means
to be a trader.
In effect, your foundation is your ultimate contingency
plan. If your execution fails, you can count on your
foundation elements to keep your organization working
until the problems are fixed.
When
your
execution
circumstances
arise,
plans
fail
or
whenever
your
organization
and
unusual
yourself
need standards to fall back on. Standards specify the
minimum
level
of
competency
and
professionalism
required in all parts of your trading. When you set
standards you're creating a situation of discipline,
which
will
benefit
your
trading
in
the
long
term.
Higher standards are always better than low standards
in this case. Easy to understand but hard for 90% to
adapt to it.
Training
traders
is
essential
to
think
they're
too
perfect
busy
execution.
to
spend
any
Many
time
training. That's a fallacy. Military organizations find
time
to
train
and
rehearse
even
in
the
middle
of
combat, and traders need to do the same. War is never
won or lost in one mission or one battle but is the
cumulative
result
of
a
sustained
campaign.
If
you
aren't continually learning and grafting new insights
into what you're doing, you're not going to get better.
If
you're
in
business
to
win,
you
have
to
train
regularly. Change your mindset a little. The training
is arguably the essential aspect when it comes to the
business of trading. There is nothing more crucial than
ensuring
market.
that
Do
you
you
have
have
what
the
it
takes
experience
to
enter
needed
and
the
the
mental edge to go ahead and execute a trade? This is
going to be different with different people, and you
must do a self-assessment.
You won't win in the twenty-first century by merely
reacting to change or making incremental improvements
to maintain your current position. To win, you must
decide what you want your tomorrow to be, and then make
it
happen
competitive
faster
than
the
environment.
rate
of
change
Professional
in
sports
your
teams
don't
rely
on
last
year's
training
for
this
year's
results. Instead, every year they go back to boot camp
and
train
at
the
basics
until
they
become
second
nature. Keep researching. What are other strategies you
could integrate into your system? What can you do to
optimize your results? These are basic questions you
must keep asking yourself.
A great-accelerated training program will involve three
key steps:
• Desired
learning
objectives.
Practical
training
starts by answering the question: "What will I be
learning today?" And training is never casual, or
ad
hoc
but
it
is
structured
with
a
clear,
measurable and achievable objective.
• Demo/Do.
Great
interactive.
You
training
see
is
someone
always
do
hands-on
what's
and
required
(the demo) and then you have a chance to do it
yourself. This demo/do cycle is repeated again and
again
until
you
can
perform
it
confidently
yourself. This is the only way people can master
the new skills required. Set up a demo account and
ensure
consistency
before
taking
that
leap
into
live accounts. Is your strategy working, do you
know what you are doing and is the mental side
strong. One must be able to let a winning trade run
and cut a losing trade short. The mental side of
trading is often ignored but it's actually the most
important aspect when it comes to trading.
• Continuation
training.
Regular
training
must
continue. This is the opportunity to stay fresh and
current with the essential skills required. It's
the equivalent of going back to boot camp once a
year
and
training
practising
is
an
the
basics.
opportunity
to
Continuation
fine-tune
basic
skills and competencies. It is a chance to go back
to
basics
and
renew
your
goals
and
intentions
within your trading.
Perfect
execution
operates
very
effectively
at
an
individual level. You can use it to set out your life
goals and identify your personal centres of gravity.
You can then develop the execution in cyclyes around
your
daily
responsibilities.
It
is
important
to
understand how certain factors affect your trading. By
debriefing regularly, you can accelerate your progress
towards achieving. In your own life, you will usually
have several different execution cycles operating at
the same time:
• A physical fitness and workout cycle to maintain
your fitness and build long-term health
•A
personal
attempting
knowledge
to
learn
cycle
more
by
and
which
get
you
better
are
at
everything you do
• A corporate cycle embracing everything you do to
earn an income
•A
personal
spouse
are
finance
cycle
working
by
towards
which
you
long-term
and
your
financial
goals.
• Quality
of
life
cycle
relationships
• Other personal interests
embracing
your
family
All of these cycles have to mesh together and be woven
into
your
life
in
order
for
you
to
feel
good.
The
execution process can be used in all these areas with
equal relevance and applicability. Once you manage to
find the balance of all these different elements, you
will see your trading begin to thrive.