The 6 Thinking Hats
If you don’t know the 6 Thinking Hats by now, I have to ask.
How do you solve problems, deal with arguments or make decisions?
I do forgive you though, as these strategies are not ones we learn in school.
In fact, when I first read about this strategy, I got to say every aspect of my life changed (including trading).
I hope this article will change your life too.
Let’s start with the main man himself.
The Author of The Six Thinking Hats
Edward de Bono is a world-renown lateral thinker, writer and philosopher.
In fact, he was the first person to use the term ‘Lateral Thinking’.
Born in 1933, in Malta, Edward has achieved a number of degrees and has published over 85 books (mostly on thinking and the use of language).
But out of all his works of art, there is one of the most popular techniques that changed the world and changed the way we think.
It’s called The Six Thinking Hats or 6TH.
Here’s how it works
There are six different imaginary hats, with each having a different colour.
Each time you put on a hat, you change the way you think about something. It also helps you see with better clarity and with a different perspective.
Whether you’re having an argument, making a decision, solving a problem, building a business or creating a trading strategy – the 6 Thinking Hats will help streamline the process.
If you’re with more people, make sure everyone is wearing the same hat at a time, to avoid conflict.
Let’s now get into the inner workings of the 6 Thinking Hats, and how it can apply to your trading and other aspects in life.
HAT #1: WHITE
This is the hat that contains all of the information, facts, data, figures, metrics and statistics.
When it comes to trading there are certain facts that you need to have considered including:
The broker you choose
The costs involved
What equipment you have to trade
Back testing, forward testing and real testing data and statistics with your strategy.
HAT #2: RED
The second hat you’ll put on is the RED HAT.
When you put this hat on, come to terms with what you feel.
I’m talking about your intuition, your fear, your greed and your gut feeling.
Then when it comes to trading ask yourself these questions…
· Can you handle risking money you have?
· Do you feel you have the discipline to pursue trading on a weekly basis?
· Do you enjoy the idea of trading?
· How much money do you think you can easily deposit into your trading account?
· How much money do you think you can psychologically handle losing, if you take 10 losing trades in a row?
· Do you think you can sleep easily at night knowing you have your money tied up in the markets?
Once you go through all the feelings and you answer the questions, then you can move to the third hat.
HAT #3: YELLOW
This is the hat you’ll find is the one, you want to leave on when you think.
It’s the hat that contains all the benefits and rewards.
When you put this hat, you’ll think of the following with trading:
What are the benefits to trade?
How much money do you want to make a year trading?
Why will your trading strategy work?
What are your goals as a trader?
Why is trading the best decision for your financial future?
Feeling good? Well you’re supposed to when you put on the yellow hat.
But we still have three more hats to go…
HAT #4: GREEN
With every decision comes extra out of the box thinking. And that’s where the green hat comes in.
When you put on the green hat, this is where your imagination should help you with brainstorming, new ideas and add-ons to the think tank process.
With trading, there are just so many different ways to be creative. And you’ll find that with ever evolving markets, you’ll need to adapt and adjust course.
Here are some ideas to think of when you put on the green hat.
How can I let my winners run further systematically?
How can I increase my win/rate i.e. Trailing stop loss
What indicator can I use for peripheral vision to help with my confirmation on each trade?
I should create and print a few psychology sticky notes to help with my trading.
I should name my system to be more personal with it
I should find ways to tweak my system which will help with the performance
I should have a trading consultation with Timon to help build and optimise my trading strategy better J.
HAT #5: BLUE HAT
When you put on the blue hat you should think of three main things…
Systems, criteria and planning.
This is where you’ll choose the criteria you’ll follow with your trading strategy.
What indicators are you using?
What parameter’s are you using with the indicators?
What time frame works best?
What calculators do you need whenever you trade?
This is where you’ll find the main work takes place once all the planning is done…
And one where you’ll eventually marry a strategy to help grow your portfolio.
HAT #6: BLACK HAT
When you put on the black hat, four things should arise instantly.
Difficulties, problems, weaknesses and risks…
I saved this hat for last, because it’s the only hat that will most likely help you decide whether trading is for you or not.
But you can re-arrange the hats according to your won preference.
The main things to ask when you put on the black hat, with trading is:
What are the dangers of trading, risks, financial risks and time risks?
What if the system stops working?
Why are you sceptical about trading?
What if the current markets go into an unfavourable territory?
What if the market drops to zero when I’m in a long trade?
You now have The Six Thinking Hats to your every decision making process.
You’ll find that it will force you out of the mono-lateral way of thinking which you’ve habitually had your entire life.
You’ll see things with new perspectives and compartmentalize issues in new ways…
It might even pro-long your marriage or improve your relationships…
If you enjoyed this article, I would love to hear your thoughts… You can email me at Timon@TimonandMATI.com…
I do this for you everyday because I love it…