Part 2: The SMART Trading Process — Building a System You Can Trust
This is a Guest Post by Dan Fitzpatrick of StockMarketMentor.com
In Part 1, we shifted the focus away from self-criticism and toward a more objective evaluation of your trading environment. Once you understand that the market itself is often the primary driver behind your results, you can approach your trading with far more clarity and much less noise.
But market context is only the first step. Even in the most favorable environment, you still need a coherent process — a structure that removes improvisation and replaces it with deliberate decision-making. That structure is what I call the S.M.A.R.T. Trading Process™: Strategy, Market, Attainable Target, Risk Management, and Tracking.
Think of S.M.A.R.T.™ as the operating system that keeps your trading running smoothly. Without it, you’re relying on instinct, emotion, and impulse. With it, your trading becomes measurable, repeatable, and far easier to manage.
Strategy: A strategy, in the truest sense, is not a vague idea about buying strong stocks or trading breakouts. A real trading strategy is a simple, written set of rules that outlines
(1) What types of stocks do you trade?
(2) What your setups look like, and
(3) What triggers your entries?
If you can’t summarize your strategy on a single page — in plain language and with plenty of room left over — then it isn’t a strategy; it’s a collection of habits.
Traders often underestimate the clarity that this exercise can bring. The moment you commit your rules to paper, you eliminate ambiguity. You also eliminate the temptation to improvise in the heat of the moment, because the rules are no longer floating in your mind — they’re staring back at you, asking to be followed.
Market: Once your strategy is defined, you must align it with the market. I discussed the importance of the market environment in Part 1 of this series. This is where many traders go off course. They have a strategy that works beautifully in a trending environment, so they continue to use it even as the market drifts sideways or weakens. It’s the equivalent of using an umbrella as a parachute — the tool isn’t bad, but the environment doesn’t support its intended use.
Strong breakouts require strong markets. Aggressive growth setups require momentum in leadership stocks. And mean-reversion trades often require volatility that isn’t present in more orderly conditions. When traders overlook these distinctions, they often interpret their inevitable losses as personal failures rather than mismatches between their strategy and the environment.
Attainable Target: With Strategy and Market aligned, the next step is ensuring that the setup identified within your strategy presents an achievable reward. And that potential reward must justify the risk you take when you put on the trade.
This is where trading becomes a craft. A setup is not a prediction — it is a specific structure on a chart that your strategy recognizes as valid. You enter not because you “like” a stock, but because the pattern meets the criteria your strategy demands.
The attainable reward is equally important. You must be able to visualize where the trade can go if you’re right, not in a fantasy sense, but in a price-structure sense: prior highs, measured moves, areas where supply tends to show up. If you cannot articulate a logical path to profit, then you don’t have a trade — you have a hope. And hope, as every experienced trader eventually learns, is not a strategy.
Risk: Risk is where the trade becomes real. Once you commit capital, your money is exposed, and exposure requires boundaries. You must define what “wrong” looks like before you enter the trade. If price reaches that point, you exit — not because you are emotional, but because your thesis has invalidated itself.
Many traders prefer tight stops, but tight stops often come with a hidden cost: frequent shakeouts that turn valid ideas into small, frustrating losses. Sometimes giving a trade a little more room creates a more stable experience, provided you reduce your position size accordingly. The point is not to avoid losses — losses are the cost of doing business. The point is to make them controlled, acceptable, and part of your structure rather than part of your stress.
Tracking: The final component of the S.M.A.R.T.™ process is Tracking, and although it appears last in the acronym, it may be the most transformative. Tracking your trades — not just the entries and exits, but your reasoning, your emotional state, and the conditions of the day — gives you visibility into your own patterns.
Without tracking, you are flying blind. You may think you know why a trade succeeded or failed, but your memory is a biased historian. The data reveals the truth: what setups you actually perform well in, how your performance changes with market conditions, and which behaviors consistently undermine you.
Tracking turns trading from self-judgment into self-knowledge.
The S.M.A.R.T.™ process doesn’t make trading easy — nothing does —, but it makes trading simpler, more structured, and far more sustainable. You stop relying on inspiration and start relying on process. You stop reacting to the market and start responding to it. Most importantly, you create a framework that allows you to learn from your own experience, rather than repeating the same mistakes and hoping for different outcomes.
In Part 3, we’ll look at how S.M.A.R.T.™ becomes more than a theory — how you convert these concepts into daily habits that build consistency, confidence, and long-term improvement. That’s where the real transformation happens.
You can follow Dan Fitzpatrick on X (Formerly Twitter), watch him on YouTube, or get his “Fitz In Five” Daily Trading Video at StockMarketMentor.com.