A simple way to be a better trader

Discussion in 'Psychology' started by detective, Feb 14, 2008.

  1. Trade less. A lot less. Its that simple.

    The biggest problem that most traders make is taking profits too quickly. This leads to overtrading. Some market dunces have quaint sayings like " you never go broke taking a profit. " That is just bs. If you take profits too quickly, you will go nowhere in this business.

    Trading less is closely related to the one thing people need to do. Sit. And watch and wait. Wait some more and keep waiting. Being selective in one's trades is a way to reduce trading, have longer time frames, and keep losses small because the entry will by nature be good because of your selectivity. Good entries allow fairly tight stops with big price targets providing a good risk reward ratio. I am assuming that one has had some success trading and has a winning system or discretionary method.

    Look over your trades and see which ones have made you money and which ones have lost you money. The few best trades and trade ideas likely provided most if not all of the profits on your trading.
  2. exactly.........i think one prop firm owner said the same thing when asked why most traders fail.....he said because they don't hold their winners long enough to cover all the losses.........but you don't want to make the mistake of getting married to a position long after the countertrend traders have been liquidated.......this should'nt be a problem if you are well diversified.
  3. For example, I am targeting a price range where I would go short stocks, and although I barely missed the entry last Friday, I'm not chasing, I am waiting for the market to suck in more longs before putting out shorts, and I know the longs will be sucked in if we get above 1400. I am waiting.

    The sheep are waiting for a break of 1400 or a test of 1270 to get massively long. A break of 1400 would be a exiquisite entry for a home run trade riding the market lower into the fall of this year. Sipping on daiquiris at the beach riding a big winning short position in stocks all summer is my goal this year. We'll see if it plays out that way.
  4. So if your system is generating for example like 15 signals per day...

    How do you know which ones to ignore so that you can say you are trading less. :confused:

    Simply, isn't less a matter of perspective depending upon the trader.

    Also, wouldn't you have to also learn how to let your profits run prior to learning to take less trades. :confused:

  5. pneuma


    I think it depends more on your style or approach. Yes for long med term traders what you say is quite correct, however for short term chaps i don't think so.

    Longer term trader look for fewer large winners, with more small losses. They might have 30% winners that generate average returns of 1500, and 70% losers that have average losses of 100. This is a profitable approach but probably only has 100 trades per year.

    Shorter term traders will look for many small winners with the occasional big loss. They might have 80% winners with average win of 250, with 20% losing 500. This is a profitable approach and probably has 1000 trades per year.

    Both approaches have positive expectancy and are profitable. I know from personal experience as I trade both ways. It comes down to the individual as to how they want to be profitable, not what is right or wrong.

  6. bat1


    markets today think short term the days of thinking
    of buy and hold don't hold anymore markets, stocks
    are bouncing 1 to 3 points a day now which adds up to alot of money daily..even holding over night is very
    risky your stocks could gap down 4 points over night!
    which could even take your stops out! daytrading
    to me is the best way to go I buy and sell one day
    at a time and never hold overnight you can't beat it
  7. thats bs. the one charateristic every single big trader on the p@l board has is they trade huge vol with low commissions.show me anyone on the p@l board thats throws up 10-20k days that trades 10-20k shares a day. my friend just sat next to one of the if not the best day trader in america who trades 400-800k shares a day. he said man its no secret what he does. all he does is take shot after shot after shot till he's right then lets it ride a while. keeps the losers small and adds huge on the winners. his p@l was swinging from down 20k to up 50k and he ended up 30k plus both days. he has tons of news services and is connected to several traders during the day. AND THE HIGH $ TRADERS ALL TAKE MASSIVE RISK WITH HUGE POSITIONS.
  8. It heartens me to see so many retail traders think that the road to riches is through hyperactive trading. People are still so shortsighted that it creates opportunity for people like me. I've been there done that. So have many others.

    Sure, if you want to try for a few K per day with heavy leverage scalping intraday moves, it can be done. If you want to make big money, you don't do it daytrading, you do it by holding and holding your winning positions. For a few weeks to a few months. This advice is aimed at winning traders.
    Losing traders will still lose, but they will lose much more slowly trading less.

    I wish I was still short the financials from 2007! How many others don't wish the same thing? That's a classic example of holding on to obvious winners for home runs.
  9. the matter is wrongly debated.

    high or low frequency trading is not the issue here, it's the quality of the trades, hence trade less

    what the OP meant was be SELECTIVE and take only the best looking setups, which to me sound very good.

    HOWEVER, while partly or fully discretionary you have this luxury, when mechanical, you don't have this type of edge.

    So, this does not apply to all traders, SO this is not a good advice to give to all traders.

    Full stop.
  10. as for long term/short term trading. it depends on two things:

    1) your lifestyle and how dedicated you can be to one style over another

    2) your cost of doing business which should not be greater than say 10-15-20% of any trade's expected winning amount. anything more than that is a bit self defeating.... i'd go for a lot less...
    #10     Feb 15, 2008