We often talk about selecting good trades and waiting for high probability situations. However, as a member correctly pointed out, this seems to be at odds with what professionals in other fields need to do, in order to reach the highest levels of performance. Whether you think about a professional swimmer, golfer, or even chef, deliberate practice is required, in order to master the discipline.
So it seems like a logical objection: “cherry picking” trades seems to be at odds with making lots of trades for practice. In this article we will attempt to explain why “taking lots of trades” can actually be a harmful practice, and what constitutes solid trader training.
Traditional Trader Training
Traditional training goes something like this: “here is a setup, learn it by heart and when you see it, trade it. Do not trade unless you see the exact same situation presenting itself”.
With this kind of mentality, traders will flip through charts all day, looking for setups (which in my experience is counterproductive) without any consideration for the underlying conditions. We’re in the realm of probabilities – not certainties. All trading decisions come down to a judgement of a situation which is uncertain.
By blindly executing a setup, independently from any other factor or consideration, you would be playing a pure numbers game without any real feeling for the setup itself, which conditions are favourable and which are not. I would like to stress here that trading wisdom doesn’t come from logic and rationalism, but instead from empiricism: the experiences perceived through our senses, which become a guide in probability judgement.
Are You Practicing Proper Trading Practices?
Let’s get even more practical: what if the setup you are practicing makes no sense at all? In that case, you would be training yourself to execute a bad habit. And that gets you into a more complicated situation because, in order to turn your trading around, your whole mindset will need to be reversed along with the habits.
There’s also a difference between practicing good habits and practicing bad habits thinkingthey are good habits. Trust me, the amount of work that is required to get to the essence of solid trading principles (and from there, work towards transforming the principles into a checklist) is something that perhaps 1 out of 100 people do. The rest just never make it to the point where they are trading in a consistent way.
This is one of the reasons we have put together our On-Demand Workshop Video series. We have various recordings where traders detail their methods, which took years to perfect. And these people had industry experience and contacts. Yet not many people actively try to emulate (first) and mould to their own personality (second) the practices that are detailed there. I believe it has to do with the time & energy that is required, which discourages most people.
Other aspiring traders might want to reinvent the wheel. I went down that path as well, doing loads of work myself, but like most people I felt there was something that eluded me. I knew that luck was playing a larger role in my trading than was advisable. So I found help. Without help from industry contacts, I would never be where I am now.
Quality vs Quantity
To make matters more practical: with a bit of help, I had learned how to identify and trade a trending market. However, I started trading everything that was moving. Of course, it was inefficient despite my best attempts to apply setups – i.e. practice the technical aspect of what I had put together. What kind of feedback did I receive? “You’re trading way too much!…we don’t dispute the nature of the setups you’re using, just that in these conditions we wouldn’t execute that particular bet…but if your records tell you that it’s a viable endeavour, by all means ignore our rambling”.
The magical phrase was “if your records tell you“. Industry traders will frequently point to track records in order to understand what can be done better and what is already working. Since there can be many answers to the same question, in trading, it goes back to doing the hard work yourself. And here’s another sticking point: you can only trust your records if you’re consistently applying the same method over & over again. And that means:
- same trade identification criteria (what to trade, where & why)
- same entry rules (setups)
- same trade management (scaling/pyramiding, all in-all out, trailing stop, etc.)
- same risk allocation (fixed fractional, etc.)
How many people get to the point of actually doing this?
Over to You
So on one hand, disciplined repetition generates confidence and clear trading records. This doesn’t mean “frequent repetition”: it means knowing what to look for and betting on those clear opportunities and passing on everything else. But hardly anyone gets to that point. And when they do, they all realize that most of the profits (on the retail side of things) come from eliminating unforced errors. So my suggestion is: trade less, and make sure you’re executing higher quality trades by stacking the known odds in your favour.
by Jul 12, 2017 – 3.16 pm|
About the Author
Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.