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 my last blog post I discussed starting at the beginning and identifying strategies and vehicles to test. I talked about the importance of educating yourself on all the different ones that are available to you. This is a very important step in the overall process because you’re laying the educational foundation of your trading career.
If you have the desire and the resolve to stay in the game long enough, studying and testing all kinds of things and paying attention to strategies that show success, the chances that you will find strategies that match your personality are HIGH.
This is because as you study and test more and more strategies over time you will find yourself narrowing down your list of strategies through the process of elimination. And as you eliminate strategies or just put them aside temporarily, you will start noticing those strategies that just seem to stick around and not get nixed.
And you should start paying attention to these strategies. You should ask yourself why you keep coming back to them. And you should journal about them.
In fact, you should journal about both: the strategies you like and don’t like. And you should be very specific. Are they tedious and hard to manage or are they easy for you to deal with? In testing do they make adequate returns or are their returns just not high enough? Do they seem too risky or do their risk profiles work for you? Are they too active, not active enough or just right for your lifestyle?
If you don’t enjoy trading them, why? If you do enjoy trading them, why?
If you start testing a strategy again after you had discarded it weeks or months before, ask yourself why. And journal about it.
If you’re very specific and continue to journal about everything you’re testing and trading you should start to see patterns emerging. You might start to realize that you gravitate toward a certain type of trading, like intraday with equities or automated systems, for example.
If you start to notice patterns like this you should pay close attention. Your personality is probably trying to tell you something, like “stick with this one!”
No matter what amount of strategies I studied and tested I just kept coming back to swing trading and market-neutral options. They just seemed to fit my personality.
I wanted to give up on swing trading many times and just be an options trader. I just couldn’t bring myself to deal with losing more often than winning.
But I couldn’t shake it. The charts really interested me. And the more I studied charts the better I got at spotting opportunities.
Eventually I started seeing highly favorable risk-to-reward setups happen over and over again and at that point it was just a matter of developing a trading plan that would take advantage of them. Easier said than done, I know, but just by sticking with something that kept nagging at me I was able to turn a very important corner.
But the strategy that became my first winning system, the one that I really latched onto and which propelled me to the next level in my trading, was automated trading in volatility products.
It was automated trading that pulled me out of that strategy-hopping stage for good and which became that much-needed anchor for my portfolio.
Finding that successful strategy that matched my personality was a HUGE event. I couldn’t have become a consistently profitable trader without it.
Once I started to get a taste of success and a deeper understanding of the vehicle I was trading, as well as why it was working, I was in. I was engaged. And that’s when my trading turned the corner.
My automated short VXX strategy made sense to me, so I kept running it and studying it. And even when I’d experience the inevitable drawdown I’d stay in it because my understanding of the strategy gave me enough faith that it would keep working.
Armed with a profitable strategy and finally feeling like I knew SOMETHING about trading, I was able to stick with the other things that nagged at me: market-neutral options and swing trading.
You see, the demystification of the money making process in the markets is very important. Often when we begin we don’t fully understand why we make or lose money because we don’t know enough yet. So if we can find something that works and that we understand inside and out, it helps to illuminate the key aspects of other strategies for us as well.
You start feeling more confident in your ability to figure out the other stuff that you couldn’t figure out before, or stick with the stuff you would have given up on before. You really start to believe that since you found something that works you should be able to find something else that works. It just seems more plausible at that point.
And that can be a huge boost for your progress.
In 2016 I finally found that market-neutral options system that showed success and matched my personality: the Road Trip Trade. I traded it for two years and made money. I felt like a real trader.
And in 2017, because the market was just going straight up, I developed my first profitable swing trading plan with equities.
I couldn’t have developed these profitable components of my portfolio without that automated strategy providing an anchor for it and boosting my confidence. It was the first system that showed success and matched my personality. And it has led me to where I am now.
Keep working to find YOUR strategies! Stay in the game!