Low risk / high probability trading and diversification – that’s my approach to trading in a nutshell.
My losses are small and frequent. But gains are modest, sometimes large… and about as frequent as losing trades.
My philosophy is having a performance level whereby my percentage of winning trades oscillate at roughly 40 to 60%. Trade management does the rest. Sometimes my performance will suffer a bit and dip below 40% winners, and account suffers.
But you know what – that’s okay. That’s what money management is for. However, every once in a blue moon I’ll get on a hot streak and have a great run with lots of winning trades (70 to 80% winners)… and the account reflects this. These winning runs more than make up for choppy periods of trade performance. No need to go for homeruns all the time – when lots of singles and doubles and other multiples do the trick – even with plenty of strike outs and walks.
Trading in the direction of a trend is cool… entering on pullbacks to support or resistance and swinging in the direction of the trend. I like channel/pennant breakouts, too. But some of my lowest risk trades, and most exciting ones are picking tops and bottoms. Not for the novice or faint hearted. Have to have the ability to take a small loss quick and without bruising the ole Ego. But my strength lies in isolating support and resistance… so that’s what I go with.
One of my first mentors was highly supersticious. He said it’s bad luck to tell others your trading positions. I am generally tight lipped about my trades out of my „Toms Daily Emails“ service. Getting involved in here has loosened me up, tho. So I’m working on it.
I also place a high priority on constantly evaluating my performance, maintaining a high level of positivity, practicing patience, discipline, etc. I’m trying to not ignore the psychology of trading and how to modify negative patterns of behavior to a more positive and productive way of interacting with the markets. My previously mentioned trading mentor told me, „Work on mastering yourself first… then the markets.“ It took me a long time and lots of money to fully appreciate what he was trying to convey to me.
Most of us search in vain for that one indicator, system, or method that will make us rich… when more often than not, the answer to our problems and questions are only to be found within. I don’t care what method is ultimately used. Without a high level of motivation and clearly established goals, discipline, patience, consistency, organization, and a high level of confidence and positivity… failure in this business is almost assured.
This is the dilemma that faces new traders. It’s what they fail to realize. Trading requires HARD WORK and the GUTS to look deeply within… and uncover what it is that makes us tick. Here lies the master key.
Because once you figure out how you think and feel on a regular basis when interacting with the markets, you figure out what makes the market tick. After all, the markets are but a graphical representation of the „collective consciousness“ of literally hundreds of thousands of individuals.
Human consciousness is what ultimately drives a market. So exploring this area is very vital to successfully trading. Yet it’s the most overlooked.
I encourge everyone to make a solid commitment in exploring the inner mysteries of SELF as you go about learning about market analysis, strategies, etc. You will not regret investigating along these lines. Look at today’s Market Wizards and their writings – they are the first to say that profitable trading has less to do with a method… and more to do with peak mental performance.
IS TRADING REALLY FOR YOU? Do you have what it takes? Do you understand that the odds are heavily stacked against you succeeding?
Do you have sufficient capital? If you lose this money… will it cripple you financially? Do you have the patience and good sense to not risk real money until you know what you are doing and have a trading plan? Until you have paper traded?
Do you understand that even if you suceeded in paper trading, that you may lose it all when the real money is on the line? Do you understand the internal stress and pressures that trading may cause?
Can you seperate your self-esteem and self-worth from your trading performance? Do you have any idea how hard it is to become a successful trader?
Do the answers to these questions make you scared? Do they make you doubt? Think about it. Really think about it.
Trading is a business. It is not for most. If you have any doubts after reading this text, seriously reconsider if trading is for you. It’s okay if it isn’t. You are not less of a person for not trading. Nothing wrong with long term investments in stocks and real estate. You will do real well over the long run. In fact, most retail traders should invest for the long term instead of going for quick riches.
If, after truthfully answering these questions, you still feel a burning desire to be a trader and speculator, then proceed. But always remember this. The greatest asset of a trader… is simple COMMON SENSE, and being able to keep your wits about you. I already described other impotant characterisitcs (discipline, positive thinking, etc). But simple common sense is what will save your ass when the shit is hitting the fan. Because simple common sense is the first thing to go out the window when we are under stress and pressure to perform. „Nothing’s more uncommon than common sense“… not too many truer statements out there than this one!
I want to point one thing out – in particular to all the skeptics out there, and I know of you. I don’t claim to have the Holy Grail. My method of trading is not exotic, based on „insider secrets“ or such nonsense. In essence, my approach integrates several trading concepts into a unified approach to percieving low risk trade set-ups. S/R, multiple trend analysis, breakout theory, pattern recognition and entries, and strict risk and MM priniciples.
This is the basic, core phiolosophy to my trading. Nothing new, just a unique manner of integrating established trading priniciples. And a disciplined adherence to a trading plan.
Consistency is the key. I also use some „more advanced strategies“, but all is based on the basic principles.
I make no claims to be a millionaire investor. I do, however, make enough money trading to be able to sit at home and watch the markets all day if I want to, or take my Marie and go skiing all day long any time, interact with my mates, pay the bills, and keep the wife and family happy. It’s not easy. I put quite a number of hours at all this, but I love what I do and am happy, so that’s all that matters. Some of my students trade less – with less time involved.
But just forget about the idea of working 5 minutes a day in your underwear and making millions. It just won’t happen. I claim at least half an hour in a cowboy’s hat, hehe.
I teach a complete philosophy and subjective methodology to my students… not market a system. My finacial affairs is my business and no one else’s. The day I manage other people’s money outside of what I do for family and close friends, then I’ll prove performance, as all CTA’s are requried to. But I have no plans in managing other people’s money.
Managing my own money and the family fund/trust is enough work as it is. I’m heavily involved in the offshore investment arena, period. That should say enough about my philosophy towards revealing financial information to knowlegable readers. Those not happy about that, no problem… I ain’t pointing a gun to your head to make you read my stuff on the web or buy my courses.
My current status as a „teacher“ is definitely a short term gig. Takes a lot of time – especially since I give a lot of time and energy to my students, answering questions and writing up nightly Emails of next session trades and other additional stuff not in the Manuals… because I want them all to do good and reflect positively on me.
But what I feel at this point – a couple of years and I’m out of the teaching business. By then I will have hopefully earned enough good karma (my prime motivation), made a difference in a few lives… and I go back to seclusion. Honestly, sometimes I feel I’ll burn out on the teaching biz even sooner than that.
You know, I’ve got my God, my family, my markets, my skis, a kickbike and just great outdoors all around me… and that’s basically all I need. I could do without the scrutiny that „vendors“ as we know them recieve. Who needs the bother.
So, my whole motivation is as simple as this; to make a difference to a few people, and earn a little good karma (God knows I need all the help I can get). And unless anyone has ever recieved a letter of thanks and appreciation for teaching, it’s hard to understand this, anyway.
Yawn. Guess I’ve babbled long enough. I think I’ll be able to get to sleep now. Hope this rumble helps someone, somewhere. If so, then it will have been worth writing.