This blog is designed to help new traders and those who have yet to become profitable understand what it takes to become consistently profitable. It’s a good idea to read the Introduction to Preston’s Mentoring Blog and to watch the 01/29/20 video “Consistently Profitable Trading: It Does Exist” prior to reading this entry.
This blog is designed to help new traders and those who have yet to become profitable understand what it takes to become consistently profitable.
Becoming a consistently profitable trader is NOT easy, but it IS worth it. And it DOES exist.
In a previous blog post I talked about how I overcame my learning curve by finding that first strategy that showed success and matched my personality. I talked about how important it was for me to stick with it in order to develop a deeper understanding of why it worked and when it worked and how that ultimately propelled me to the next level in my trading.
That next level in my trading was a real turning point because it was when I began digging deeper into other strategies as well, expanding on existing ideas and approaches and personalizing them. It was when I started to really grow as a trader.
When I had been stuck in that terrible strategy-hopping stage I just wasn’t able to see that the reason I was actually hopping from strategy to strategy was because I was trying to fit square pegs into round holes.
That is, I was trading other peoples’ strategies based on their specific rules through market environments that weren’t favorable to them. So I would stop trading a strategy after one loss and move on to another one until that one lost and then I would rinse and repeat.
I wasn’t trading strategies based on my own rules and the market environments I was in, which means I was pretty much just closing my eyes and hoping for the best.
Trading other peoples’ strategies based on their own pre-set guidelines is how we learn. It’s a necessary phase in the process. But if you’re going to actually rely on those strategies to make money for you instead of using them to build your own approach to the markets, it’s almost guaranteed that you’re going to remain stuck in that strategy-hopping mud.
This is because you’re always going to see the TRADES as the reasons for your losses, not YOURSELF. If you’re not holding yourself accountable for your results and instead holding the strategies accountable, you’re just going to continue to hop from one strategy to the next looking for one that never loses.
It’s like trying to find that diet and exercise routine that works. You search and search and search, reading this book and that book, trying this diet and that diet, always being promised the best results.
You follow all the guidelines of each diet, thinking each one is going to be the ONE, and maybe you lose a few pounds at first but almost invariably you get frustrated and stop following it because there’s something about each diet that you don’t like or because you just didn’t lose enough weight.
But if you start taking the parts of each diet that you like – the parts that actually work for you – and start building your own diet and exercise routine based on what has shown success and works for your personality, all of a sudden you’re not only losing weight but you’re finding it easier to follow the diet and to really stick with it.
Suddenly you’re personalizing the process. You’re taking different ideas and strategies and making them your own. This can be a very important turning point for a person looking to get fit and healthy, and for a trader looking to take that next step toward profitability, because this leads to what I keep pounding the table about: STAYING IN THE GAME.
This is because making strategies your own demystifies the process. It’s like shining a light into a pitch-dark room and seeing what you couldn’t possibly see before. You start to actually feel like you’re making progress, and you start to actually understand WHY you’re making progress.
When I started trading The Road Trip trade (RTT) in 2016, which is a market-neutral options trade created by the great options trader Dan Harvey, I started trading it as close to the established rules as possible.
Through the rest of 2016 and into 2017 I tweaked it here and there and enjoyed a comfortable degree of success with it in those markets.
But when the “volpocalypse” happened in February of 2018 and volatility spiked very quickly and ferociously, I experienced losses in the trade that set me back. Many market-neutral options traders experienced this.
So I had to step back and reassess what I was doing. Was it not the trade I thought it was? Should I be trading something else? Did I mess it up by tweaking it? Did I not tweak it enough?
Once I’d pondered these concerns for a while and started looking around at other trades, it hit me that even after all the years of blood, sweat and tears I was still considering thrusting myself back into that strategy-hopping stage. Why on earth would I do that? Hadn’t I been trading long enough to know better than that?
I chastised myself for even thinking about it. And once I’d snapped out of it and really committed myself to solving the problem I realized it wasn’t the trade or even how I’d tweaked it. The trade and its alterations had worked fine in those 2016 and 2017 environments. It was the sudden CHANGE in the market environment that had been the culprit.
So my education took its next big leap. I knew I wanted to keep trading the RTT so I had to ask myself, “Instead of hopping to another trade is there a way I can personalize the RTT to be more robust and withstand a sudden high-volatility, selloff environment?”
So I worked on it. And I got to know the trade even better. And I realized that there are just some environments in which all trades struggle.
And another light came on in that previously pitch-dark room.
I realized that even if the RTT couldn’t be my main trade at all times it could still remain a key part of my overall portfolio. It could still be a component that I could call upon in certain market environments. But if I wanted to trade it through most environments, I’d have to be flexible and have a specific plan for each.
This was an important realization because it gave me the confidence to stick with something that had shown success and matched my personality. I just had to understand when to employ it and when NOT to employ it, or when to increase risk in it and when to decrease risk in it.
Remember, you want to eliminate only those strategies that don’t show success and which don’t match your personality, not the ones that have stuck around and shown promise.
And I was learning to see and trade the markets MY way. I began developing my approach and assembling my repertoire of “go-to trades” based on different market environments. I was making my trades more robust and adaptable.
I was discovering my edge as a trader.
Now when I approach the markets every day I ask myself, “What has edge in this environment?” And I can pull from my different concepts and strategies to take advantage of what the market is giving me to make money.
Make strategies your own! Be who YOU are in the markets!