Years spent studying other traders, reviewing trades, reflecting & praying to the pre-market gods.
Lead me to these 5 trading mindset realizations.
Get ready to..
Realization #1 Know your strategy
You can find strategies by following different traders. At the TradeJournal we have verified traders using an assortment of different strategies. This is great for beginners or experienced trades looking to add a new strategy to their toolbox.
BUT BEWARE you have to be VERY selective here.
In life, we all know “the grass is always greener..” and that saying rings especially true for trading. There are endless strategies and they all seem to promise easier success than your current strategy.
Once I found MY current strategy. I put total blinders on. I cut out the noise and got to business perfecting that ONE strategy. Almost 3 years later I still have tons to learn but I know exactly what to look for, every day, while I’m trading, and this made all the difference.
I first did a small account challenge and only ONCE… I was profitable, I funded an unlimited account. That’s an account funded over 25 thousand dollars to avoid any US broker restrictions due to the PDT rule.
Realization #2 You don’t always need to trade
Knowing what to look for can be extremely liberating. It allows you to “stop trading” without a bad conscience. If your setups aren't there, walk away. And when you do see your setups.. Well we’ll cover that in realization #4
Not always trading, has been especially true, for 2022. Most of this year has been a total snooze fest for long-biased momo traders like myself. I’ve actually enjoyed the time to recharge a bit, study more, and make sure I’m ready for when things pick up again.
Something I’ve personally been learning is improving my options trading and swing trading abilities. Those studies paid off recently, when I had one of my biggest profit months this year due to those new learnings.
Realization #3 Always focus on risk, it’s the most important
When you find yourself thinking how much you can make, that's usually before a big red trade.
Developing your trading rules is going to be a fundamental part of your trading. One of the most important rules ever - is your “max stop” rule.
For example, when I’m down 25% of my biggest green day I am no longer allowed to keep trading. Say my biggest green day was 2 thousand dollars. That means when I’m red on the day 5 hundred dollars, it’s a hard stop and I need to throw in the towel.
In the slow summer month I usually tighten that up even more.
To avoid hitting my max stop I’ll keep reducing my position size the more red I get on any given day. Inversely if I’m doing well that day I’ll keep sizing up to take advantage of my flow and maximize my profits.
Here’s a post where I list all of my trading rules.
Realization #4 Always ask yourself. What’s the quality of this setup?
Warren Buffet is notorious for having “over-allocations”. There are many articles like this one that share how Berkshire Hathaway has “86% of Its Assets Invested In These 3 Stocks” (Williams), I’m paraphrasing but he’s often saying he wishes he could put all of his eggs into just one stock at times but that would be hard to do with his portfolio size.
That’s because he’s always looking for the best opportunity at any given time.
High Certainty = Focus
Low Certainty = Diversification
For us that would be the same as seeing that A+ setup. And then scaling aggressively above our avg size. That’s when we want to scale in with 3, 5, even 10x avg size. As long as we don’t create an unfavorable situation. Such as becoming our own squeeze or if your size makes it too hard to follow your own rules.
Rules such as.. cutting losses quickly. Which larger sizes.. make harder.
I like to say patience, aggression, size. You’ll hear me repeat that often on my weekday trading livestreams. Be patient for the right setup, get aggressive when it comes, and size like crazy when you're winning.
Realization #5 Less is more
Cut the bad stuff
Less trades, less strategies, less setups. I did a monthly recap a while back where after I analyzed my TradeJournal stats. I cut all my strategies down to just one. My most profitable one. This was extremely refreshing because it allowed me to focus on less, which in turn, kept me from overtrading.
Another benefit was I knew exactly what to study. With a clear strategy with 1 pattern or 1 philosophy, mine being… is the price above VWAP and 9ema (on the 1 and 5m chart). Yes or No? If so, let's trade that frontside. If not, then no trading. Time to find a ticker that is in a frontside trend, wait or call it.