Maybe it was only a “passing thought,” but come on, admit it, at one point or another in your trading career, you’ve thought about changing your trading strategy, haven’t you? Most traders do think about it, whether it’s amidst a fit of boredom, or maybe a losing streak, but at times when faith and patience wear thin, it’s easy to think that the strategy is to blame. So is that when it’s time to switch to a different trading strategy?
Very likely not, if you ask me, and I’ll tell you why. First of all, abandoning a trading strategy, particularly one that’s served you well in the past, isn’t advisable under most circumstances because it breaks the commitment you presumably made to use that strategy for the long term. Afterall, you don’t consider abandoning your spouse each time you have a spat, right? (Please say no!)
Secondly, though, where would you go from there if you did abandon your trading strategy? Off to trade some unproven and unfamiliar method that will force you to start fresh and find your way all over again? No thank you!
More realistically, at times like those, traders need only a gentle reminder and some validation that their trading strategy is still the one for them, and often, reflecting on what’s good about it will do the trick. So, with that, here are some qualities you can believe in, and telling signs that your trading strategy is worth sticking to, “In good times and bad, and in sickness and in health…” as wedding vows often say!
Way more than simply knowing where to enter the market and place a protective stop, when you really “know” your trading strategy, you understand the technical and/or fundamental catalysts behind the trade, which should breed the kind of confidence and validation you simply won’t get when trading a foreign strategy or method. For example, when trading our bread and butter chart pattern, the pin bar reversal, Lazy Traders know that the pin bar reversal signifies a very strong and decisive price response at key support or resistance. This carries with it a high probability of continuation, and ultimately, a fine chance for long-term success because you’re consistently trading in the prevailing direction of the trend.
In times of doubt, think positively and reflect upon your level of knowledge and relative comfort with your trading strategy. Remember, too, that tough times are often when you learn the most about yourself and your strategy, and if one or several drawdowns in the short-term are what it takes to make you smarter and more successful long term, then that’s an investment in yourself and your career that worth making, isn’t it?
A trading strategy is said to be a good fit whenever it enables you to trade the markets, assets, and time frames that you want, and do so using a reward/risk profile that feels comfortable. Perhaps needless to say, that’s unique to every trader, so it’s very objective. Not every strategy will work in every market, or be flexible enough to trade across multiple markets, so don’t underestimate the value of having one that is. And, when it comes to risk, some strategies are more risk-averse than others, and are said to be better-suited for more patient and conservative traders. In short, if your current strategy applies to the markets and time frames you trade, and yields suitable potential reward without calling for uncomfortable risk, then that in itself is good reason to have faith and stick with it. Finding a trading strategy is easy, afterall, but finding one that fits your unique personality, trading style, and risk tolerance is much more difficult.
Having the ability to trade when and how you want is a tremendous incentive that only a strategy that fits you and your lifestyle can offer. And just like part-time or lifestyle traders won’t be likely to thrive using complex intraday strategies, traders who want to pour themselves into the markets full time probably won’t be thrilled with slow-moving strategies on the higher time frames, either.
The key is to find a trading strategy that allows you to make the kind of commitment you want to make to trading the markets, whether it’s ten minutes or so a day or 6 hours a day, five days a week. In either case, though, a proper trading strategy has to afford you the ability to step away from the markets when and how you want to, and accommodate your lifestyle and obligations, whether that includes a day job, commitments to children and family, or perhaps a fruitful retirement that involves lots of travel and leisure time.
When you have the right trading strategy, it preserves and protects your ability to live life and do all of what matters, all while still being a consistent market participant.
In the end, money is what matters most to traders, and performance is certainly the most obvious measure of any trading strategy. So—and really consider how you answer this question—does your trading strategy produce winning results? Honestly, there’s a multitude of ways to answer that, and only few that are reliable in the least. You see, some traders will have only a short or very limited sample size to consider, which leaves them unable to speak to whether or not their trading strategy works. Others may not keep precise records or know which metrics, like win/loss ratio, or P&L, to use in determining the performance of their strategy. And for others still, the problem may not be the trading strategy, it’s that they are committing plan compliance errors and aren’t trading it properly.
The combination of these factors makes a multitude of traders unable and/or unqualified to say with confidence that their trading strategy isn’t working over a reliable sample size, which may span 2-4 complete quarters.
Moreover, every trader—even the pros—want to improve their performance results, and will look to tighten up their current strategy to do it. I’d always advise starting there before making a decision to change strategies altogether.