Why Doing More of What Works Might Help You Become Better Traders? It is a well known fact that traders are one-trick ponies. Does that have something to do with doing more of what works? I think YES.
Being glued in front of the trading screens for a long time is tiring. Day-trading could be extremely stressful. Not following a strict trading plan is definitely a losing strategy in the financial markets.
Why Doing More of What Works Does Help You Become Better Traders?
That is a great question I have been asking myself for quite some time. The answer is very obvious...
Think about every time you had a successful trade. How did you feel after taking this trade? Excited? For sure!
Now think about the time before taking the trade... Was the trade too boring to take? Maybe it was too obvious? Probably you were not even eager to take it, because you were too sure it would have worked perfectly fine. So, did you take this trade?
Thin P/L Line
IMHO, the line that separates "professional" or successful traders from losing traders stands here. It is the ability to realise that actually the boring trade, the obvious trade is the good one. It takes years of experience to reach this level. As I have said before, this is the Fourth Level of Trading.
There is more to it. As it turns out, being willing to accept your limitations is one of the reasons a lot of traders cannot make it to the higher league:
How to Do More of What Works???
This is the question a lot of you will be asking yourselves by now. There is something wrong with it in the first place. To start with, ask yourselves if you have a strategy that is really consistent. Be honest and admit when was the last time you faced your mistakes and accepted them as yours and did not blame it on the market.
I thought so. Maybe the problem is you are not facing your mistakes as often. You probably don't even have a consistent method of winning in the markets. I guess you should start from there. Once you find that first boring trade, this will be the beginning of the end of the search. Because,
Challenges Are Attractive
Challenges stand above other types of obstacles. They are exciting, they stimulate you to take action. But do you really need challenges as a trader? Do you really want to start checking other trading strategies if yours works like magic? Probably...not.
All you need is a boring trade that works well almost every time. What you need is a money management system that protects you from risking more than 1-2% of your capital per trade. What else you need is a boring methodology that is there for you when you most need it.
Boring = Success
When you are taking a trade, it should feel natural- almost a second nature. Winning in trading is probably harder than any other undertaking. No wonder less than 5% of traders can make a living out of trading. It is not a handy statistic for a lot of brokers trying to get you to trade with them. But it is the reality. Time to face the music ladies and gentlemen!
Are You Up To Becoming a Boring Trader?
In this next section, I will briefly go through these (since they have been covered in previous articles in-depth):
What to think about before you start planning your next trade
What needs to be done next
How to create a trade-plan that ensures success
How to think like a trader
How to give back
Step 1: Consider the 3Ps of Trading
Since boring trades help you go from point A to point B, in terms of positive P/L, it is essential that you have a clearly-defined vision of where you want to be as a trader. Therefore, I would consider the 3 Ps of trading first. In my eyes these are:
To make this vision clear, think about things like:
The questions you should ask yourself before taking a trade
The outcome of the trades you have taken on a gut feeling
The trades that you took that ended with the highest returns
Step 2: Consider the factors that will help you attain the #boredness status
If you don't know which way to achieve consistency, think about boredness. Try to stick to the good trades. But how to find them you will ask. Here is a list of questions to ask before committing to "boring"trades.
Am I taking a quick day-trade
Am I following my plan strictly
Did I check the higher timeframes first
Was the risk management of the trade kept
Was the R:R in my favour
Do I care too much about this single trade
These questions will allow you to follow along at the pace you've determined to be best, no matter what the market conditions are. So, did you check this box:
Final Step 3: Tap Yourself On the Back, NOT
Always be sceptical. Don't be happy with one good trade. It takes a 1,000 trades (and 10,000 hours) to be able to define a good trader... at least.
Be humble and never be over-excited. Boosted egos have been the reason for a lot of profitable traders to lose their fortunes. Even the famous Jesse Livermore has been citing this as one of his biggest obstacles in trading.
Find pride in what you do, but don't overexpose it! If you need excitement, start doing some sports. If you want recognition, do something good to a person in need. Trading is for the emotionless.
It does not mean you need to be glued to the trading screens with a baseball hat and sunglasses. We have all watched the World Series of Poker. You should be able to trade without the need to show off anything to anyone. Be cool as a...
The markets are a place where money is exchanging hands. Trading is a zero-sum game. If you cannot leave your bad habits behind, I promise you there is a bunch of traders waiting for that. So, you'd better join them and leave your ego behind.
Why Doing More of What Works Might Help You Become Better Traders
In the end, what matters is not how to become rich quick. It is probably not even how to become rich at all! What matters to become a profitable trader is probably easier than you think. The hard part though is o recognise it. On the other side, the problem with the recognition process is human nature itself.
Once you are able to pinpoint that down, you are already on the next level of trading. Once you are there, you will realise how important it is to take another boring trade. You will realise why doing more of what works in trading might be your best trading guru!
This material is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results.