By Rob Colville on December 15, 2014 in
Want to hear some of the best trading advice I’ve been given in a while? And no, this isn’t a hot tip on how to profit using some strategy that “works every time,” or a stock that’s about to take off…it’s actually simpler and far more meaningful than that.
I honestly think it’s the stuff that long and successful trading careers are built on, and it doesn’t involve analyzing the markets for hours on end, or trading more, or even trying harder than you do now.
In the end, trading well is about trading smarter: Doing more of what you are good at, and less of what you aren’t, and that was the message that I was given recently. I think that’s a valuable reminder, and while it’s not to say that we should ever stop trying to learn and improve as traders, what we shouldn’t do is forget about the knowledge and skills that have gotten us this far.
So, let’s take a fresh look at some of those things and focus in on how to profit using the clearest methods possible: those that we already know best.
As a trader, what is your “bread and butter,”or the set-up(s) with which you are most proficient? Perhaps you feel most confident trading pin bar reversals, or some other price-action set-up, and don’t feel comfortable measuring and counting waves, as is required by some of the methodologies that are out there today.
That’s absolutely fine if so, but if you often try to be a “jack of all trades,” taking set-ups that are outside your comfort zone just because you think you “have to,” well, that’s a problem. You’re trying to do too much in your trading, and it’s very likely that you aren’t being rewarded for it.
One ofmany common trading misconceptions out there is that the best traders take every set-up they see, and are masters of all of them, but that’s absolutely not the case! In actuality, most successful traders at least start by specializing in only a couple set-ups, and it’s only after they learn how to profit with those that they look to add other set-ups to their arsenal. It’s about doing more with less, remember?
So next time you analyze the data in your trade journal, pay close attention to which set-up(s) perform best for you, and see why that is. You may find that only one or two pay off time and again, and if that’s the case, then it’s plain to see that you should stop forcing trades with those additional set-ups and just“do more of what you’re good at.” That’s how to profit more by doing less!
When thinking about how to profit more, it’s easy to gravitate toward solutions like achieving a higher win rate, trading more lucrative set-ups, or any number of things that all depend on the “win” side of the equation. But what if we told you how to profit more without trading more, and with the same winning percentage that you already have?
Well, consistent with the mantra of “Trade smarter, not harder,” one certain way to profit more is simply to lose less money when (not ‘if’) you do suffer losing trades.
Are you really managing risk to the very best of your ability? Do you ever move your stops to give losing trades just a little more time to turn around, or add to losing positions, or worst of all, trade without proper risk controls in place? If so, those inevitable losing trades are costing you too much money each timeand are erasing hard-earned profits in the process. Don’t allow that kind of self-sabotageto continue!
Successful traders don’t necessarily win more than the other 90%, but they do lose less. So before continuing the quest for newfound knowledge or trading methods that promise more winning trades, first consider whether your losing trades might actually hold the key to greater overall profitability. If so, you can simply refine your existing methods without the need to learn new ones. Again, that’s how to profit more by doing less!
In the rush of things, we often get away from the basics, or the things we know, all while trying to be someone else, and for what? In trading, much like in life, we should all strive to be the best possible version of ourselves, and that’s why this little lesson stands out as one of the best trading tips I’ve gotten in a while. And the funny thing is that we weren’t even talking about trading at the time!
Be sensible and realistic about who and what you are as a trader right now, and you may find that you already know how to profit in the markets using the tools you have. And if so, don’t feel the need to rebuild what’s already a solid foundation. Instead, build on what you already do well, and you’ll get on the quickest path to becoming the best trader you can be.