At the time I thought it was a bit ‘away with the fairies’.
I thought it was pretty basic, bog-standard advice.
I had no idea, not a clue, how powerful a simple list is.
The thing is, when you right something down and commit it to paper, it makes it real.
It ‘glues’ it within your subconscious.
It almost forces you to take action.
– I’ll strictly manage risk at ‘x’ percent, no deviation. – I’ll execute flawlessly as my setup triggers, without fear. – I will analyse performance after 100 trades, not before. – I will not mis-manage or deviate from my trading plan.
It sounds so “basic” doesn’t it, and yet you’d be blown away by the amount of traders who’ve never committed their actions to paper and ‘committed’ to them.
…and they wonder why they constantly self-sabotage, etc.
The thing is, 99% of people spend their entire lives trying to get around the fact that you have to execute to get the train moving.
They search near & far, high & low for the quicker, easier, faster way that requires less effort, less commitment, less grit, and less balls.
They want the sure thing to be promised to them before they agree to do the work.
It just doesn’t work that way.
Stop searching and accept the simplicity of success:
One thing I hate about this business is the fakes and the fraudsters, the scammers and the charlatans, masquerading their ‘technical analysis’ as viable, profitable strategies when all these ‘strategies’ do is teach the same old trend lines, the same old support and resistance, the same old indicators…
Nothing new, and nothing that genuinely provides profitable, statistically-proven sources of edge, as my own strategies do.
But to this day, even after physically trading my edges live, in real-time over at my Youtube channel, even after literally sharing screen-shots of my trade journal showing genuine trades taken including exactly where I got in, where I got out, the date, the time, everything, black and white proof of performance, I’m still asked on occasion to prove myself and my strategies…
In my mind, there was only one thing left that I could possibly do to prove my being genuine;
There was only one thing left to do to prove that my strategies deliver profitable results, and that was to trade live, in-front of an audience of traders, calling trades to them in real-time…
…and this is exactly what I did yesterday morning.
Talk about putting myself and my strategy/s on the spot.
So what’s the story?
I was approached a short while ago by Sat from the DAX Masters live-room to let me know that their trader – Amit – Was going to be away on holiday during the coming week, and asking if I’d put myself on the spot and whilst not sharing the in’s and out’s of my strategies, would simply call my trades to their members within the room, live, as I executed.
I jumped at the chance, said Yes, and around came Monday morning. I entered the room thirty minutes before the open, introduced myself, and as usual, sat waiting for my mechanical DAX strategy setup to form, telling me to take a trade.
By the way, if you aren’t already aware of how I trade – That being mechanically, by using rule-based strategies – Click here.
A few minutes after the open, I was given my first trade. I called this to the room, and took a -1R loss just a few minutes later.
No biggie, losses happen, and they’re always capped at -1R.
A few minutes later, my second and final trade – As I only take two entries per-day via my DAX edge – Presented itself, and came with a hell of a profit-target to boot.
We were aiming to bank +81 points and a huge +5.8R if we were right, so I executed and called the trade, live and in real-time, to the room members;
In we went, with both my money and my reputation on the line, in front of a room of traders all putting both their trust and their hard-earned money on the line with me.
What happened next?
…the trade headed for target, approached +4R and stalled. Nothing. Consolidation, a slow grind sideways, right between entry and target.
Just a few times each year the DAX strategy doesn’t reach target on the day and leaves us waiting in anticipation overnight. This, the one day I trade in front of a room full of people, turns out to be one of those days.
I let the room know the plan, and close Skype for the day.
The next morning as I open my broker to see how the market moved overnight, I found the worst – The position has crawled back upwards towards our entry, fast-approaching our stop-loss, and currently sitting at just +0.2R in open-profit, a far cry from the just over +4R we’d reached the day before and miles away from our target.
But, as ever, the strategy is mechanical and I confirm this with the traders in the room. “All we need to do is follow the rules. No moving to break-even, no adjusting our stop-loss or our target. We sit tight and let our trades conclude without acting on emotion”.
See, most traders would’ve snapped by now. In fact, a few traders did. Some panicked and took +2R, some panicked just before the close on the first day and took +3R, some moved to break-even and were taken out of the trade with nothing during the retracement on day two, and this is exactly why mechanical strategies are so profitable;
Mechanical strategies remove the need to do the above entirely. They remove all of the stumbling blocks that hold so many traders back…
…if you can follow the rules, that is.
So, what happened next? …free-fall.
After taking us back into negative territory, and almost stopping us out, the DAX ran South and never looked back, hitting our take-profit and rewarding both myself and the the other traders who stood-firm and traded the edge with a huge, huge winning trade.
+5.8R and +81 points banked, in one trade.
It was great share this with the members of the room, and as our take-profit was hit, in came their feedback;
As you can see, it was not an easy ride, but as ever, process provided results and those who acted on emotion, who acted on fear and greed, who failed to manage risk, either took a small win, or no win whatsoever, missing out on a huge account-gain because of their use of discretion.
The thing is though;
As the strategy is mechanical and rule-based, anyone with the rules saw this trade setup and was told by the strategy exactly where to enter short, exactly where to put their stop-loss and exactly where to put their target, banking the win when we got there.
Yes, if you had the strategy you’d have taken this exact trade with me, with the traders in the room and with the other traders who’re trading the strategy.
Listen, I’ve been there in regards to the above mistakes, I’ve made all the mistakes in the book, but if I could tell you one thing that will undoubtedly change your trading for the better, it’s this;
Remove the stumbling blocks, implement a proven process, consistently, and you will achieve consistent profitability.
It’s all that’s required.
If you’re losing money, you’re doing something wrong, and from my experience in working with hundreds of traders now from around the world, the problems tend to stem from the use of discretion, acting on either emotion, or on best-guesses, predictions, and ‘feel’.
Imagine removing all of the stumbling blocks, all of the hurdles that’ve held you back and consistently lost you money so far…
What impact would that have on your trading?
I have good news for you; You can, by learning and implementing statistically-proven mechanical strategies that provides edge and come with a simple set of rules to follow.
Doing so is the reason I trade profitably, consistently, full-time from home today, and if I can do it – I’m nothing special – Then so can you.
…and it’s not just me, either.
Nic, who’s feedback is below, grew his account by +31% within just two short months of trading my DAX and GBPUSD strategies, and even with a modest £10,000 account, that’s an additional £3,100.00 added to his bank account, in eight weeks…
If he can do it, by doing nothing but repeatedly following a simple set of rules, and not deviating from them, why can’t you?
…and if Jack can trade the DAX setup before leaving for work in the morning, and have profit in the bank by the time he arrives at work, what is it that’s stopping you from doing the same?
If you’d like to change your trading, finally putting an end to the losing money, to the making best-guesses, to falling over the same old hurdles and continuing to go around in circles, running on the retail-hamster wheel, click here and let’s change your trading for the better.
I’m writing today about one of the trades I’m asked about most via Twitter and Email, that being the giant +410.7 pip and +8.21R short trade that my D1 Swing strategy handed over at the start of the year.
I live-tweeted the trade throughout the week it took place, from just after execution, through the trade and right up to closing the trade out on Jan 3rd, when I shared my deal-ticket directly from my broker, IG.
So, how did the trade come about?
As usual, I manually scanned through the major currency pairs looking for the D1 Swing setup. I spotted this within a few minutes via USDJPY and took the trade without any hesitation, second-guessing, or time wasted.
I managed risk, executed, and walked away.
A few days later, the position had began running in our favour and never looked back. Within just below a week we were up approx. +150 pips and looking good, with no exit-signal in sight and nothing to do but sit on our hands.
As we passed Christmas and moved into our second week holding the trade, there was still no looking back for the trade as price continued to dive. There’s no better feeling than seeing your edge play out in the form of a trade of this size and as usual, there was nothing to do but to stay patient whilst awaiting our exit-signal.
Finally, the exit signal presented itself as we saw USDJPY take a plunge just a few days into the New Year, and out we came with a huge +410.7 pips and +8.21R.
There’s only one thing better than starting the year by closing out a trade of this size, and that’s receiving a message such as the below in my Twitter inbox in the hours following;
Matt joined me on the trade after learning the strategy, banking above +£10,000 on the one position alone. Talk about starting the year on a high.
…and as the strategy is mechanical and rule-based, anyone else with the strategy rules would’ve taken the exact same trade alongside myself and Matt.
The answer that I’m sure most new traders will hope to hear is that successful trading lies in being skilled, and that the skills required are learnable, but in my opinion it’s a little of both, each in fair measure.
Speak to any experienced trader and they’ll more than likely be able to share a handful of stories that relate to luck, or a lack thereof.
For me, luck played a huge part in my beginning as a trader.
If you haven’t already read the ‘About Me’ section of my website, when I began trading I initially turned a small £500.00 account into around the +£6,000.00 mark in a short few weeks with no strategy, certainly no edge and nothing but sheer luck.
I bought strong markets with huge, huge stop-losses and if trades went against me I simply held them until they eventually came back into profit where I’d close them.
…far from a profitable edge. My strategy was, well, luck. Pure and simple.
No rules, no structure, and absolutely no edge whatsoever.
As ever though, my lucky run soon came to an end when one day, a losing trade didn’t turn back around. It crawled against me, and against me, further down, and further, until I snapped and took a fairly sizeable loss of around the -£750.00 mark.
This certainly put me in my place, and this resulted in me firstly realising how dangerous trading can be, and secondly making one of the most mature, sensible decisions I’ve ever made;
I withdrew most of the profits I’d made, and I invested the money in myself – In proper education via professional traders – leaving a modest amount of money in my trading account to trade sensibly with going forward, with the proven strategies I’d learned via the education in-place.
…this changed my trading, and I never looked back.
Returning then to the question at-hand; Is trading skill, or luck?
Again, I’d say it’s mainly skill, strategy and process, along with of course sources of edge and the discipline to let these sources of edge play out whilst managing risk to keep you in the game long enough for this to take place. But luck in my opinion certainly does play a large part in ones success.
As traders, we never know where or when those huge winning trades, those real year-makers, are going to occur and it’s for this reason that luck begins to creep into the equation.
A good example of this, and the inspiration behind this article in fact, was shared by Linda Raschke within her brilliant ‘Super Trader Summit’ lecture recently [Which you can watch here].
She expands on luck, and a particular lack thereof within her own trading over the years, sharing some fascinating stories. One in particular really stood out to me, this being the story of a set of German traders who traded a mechanical strategy that offered consistent black and white signals, removing the need to predict or guess or use discretion, but meaning that they had to trade every viable signal that was presented by their system, much like the strategies I trade myself.
The traders in question traded what I believe was a momentum strategy that didn’t utilise profit targets, meaning that they never knew when the next huge winning trade would appear, so although they essentially didn’t rely on luck but on a statistical edge, luck would of course invariably prove to enter the equation, as it did when they decided to take one single day off to watch a major German football game.
You guessed it, it was the biggest move within one of the markets they traded of the year, and they failed to capture this. The one, single day they took away from the screens.
You see, anyone who’s been trading a single approach for into the years will most likely be able to tell you something.
80% of profits often come from 20% of trades.
Being around for those trades really can be make or break.
I’ve certainly experienced this myself, and one particular case of luck – Good luck for some, bad for others – came via my DAX strategy when it presented us with a rare +16.6R winning trade last December and, if missed, although missing the trade wouldn’t have seriously damaged the year’s return as we ended the year with +108.5R in the bank, at 2% risk per trade, taking that particular trade was the difference between an additional +32.8% account gain on that one position alone
…or missing out on this.
And of course, I do know a trader who trades my DAX strategy alongside me – One of the most consistent and focused traders I know personally, in fact – Who did miss that trade, for being away on holiday that week. You can imagine his disappointment and frustration when he returned to see that the move had taken place and that he’d missed out on the win. On the other side of the coin, I also had a trader begin trading my DAX strategy on that very trade …to say he was pleased is one hell of an understatement.
So there you go;
A first-hand example of luck, or lack thereof, playing out for some, and not for others.
Another example of bad luck came via a friend of mine who at one point began trading a shorter-term momentum strategy on a – Get ready for this – 14 trade losing run. Thankfully he was managing his risk at 1% per trade and he knew that the strategy provided edge, so the drawdown wasn’t career-ending like it could very well have been, and he did come away profitable as probability played out in his favour, but, not easy to handle.
Would you have been able to manage risk well enough and have enough belief in your edge so as to see a 14-trade losing run out until probability began to play out in your favour and the losing run passed?
There are so many more examples and stories I could share, some of traders very much on the right side of luck, some unfortunately on the other, but fundamentally my point is this;
Know that luck will most likely play a part in your trading, for better or for worse, and respect this possibility. Make sure that you manage risk so that you can make it through the inevitable bad days, and to keep you there for the good days, because the good days always come around in the end.
Remember; In the majority of cases, 80% of profits come from just 20% of your trades.
Trading is up, then down, then up, then down, until one of those home-runs presents itself …just make sure you’re there when that year-making trade does finally come around.
Food for thought.
p.s. I initially wrote this article on Wednesday March 6th, but I’ve just revisited to add the below in;
If you follow me on Twitter you’ll have read the tweets I posted earlier today. A first-hand example of bad luck on my part happening in real-time.
…it happens. I can’t dwell on it. As I always say; Next trade.
Regarded as one of the most influential traders to have ever lived, Jesse Livermore is both storied [in the first book] and stories [in the second book] his Wall Street experiences both ups and downs, from making millions to blown accounts and back again.
The crucial lessons, the nail-biting real-life stories, it’s all in here. Again, if you haven’t read both of these yet, I highly recommend that you waste no more time.
Next, two books by professional trader and manager of New York’s proprietary trading firm SMB Capital, Mike Bellafiore;
The titles say it all; Both books expand on what it takes to trade like a professional trader, from how to approach the markets from a psychological perspective right through to building data on your most profitable setups and building a ‘PlayBook’ that consists of these, along with much, much more.
If your aim is to trade professionally then simply put, you can’t afford to have these books missing from your library.
They will change your trading irreversibly.
Next, two books by without a doubt one of the most grounded, honest, successful and influential traders on earth today, Yvan Byeajee;
Two truly groundbreaking books from Yvan here, one of which focuses on the all-important psychological-side of trading, and the second which outlines his own journey from losing trader to consistently profitable trader in-detail.
Honestly, I genuinely might not be where I am today without the above two books.
Next, a book that every single trader out there needs to read, as soon as possible, written by Michael Covel;
Whether you trade trends within markets or not, having an understanding of how they develop, form, unfold, conclude and are traded by professionals, along with an in-detail look at the statistics behind them will transform your trading, not to mention increasing your skill-set which will hugely contribute to your overall growth as a trader.
Next, a book by Jack Schwager that needs little introduction;
This book is packed full of in-depth stories, conversations and discussions with the worlds’ top traders, covering everything from essential risk- management principles, strategies outlined in-detail, performance-enhancing advice, key psychological guidance and so much more.
Honestly, since reading this I put the tips, techniques and guidance that Harvey outlines within the book into practice and genuinely saw an increase in profitability grip my trading straight away. I really mean that.
It’s a short but sweet book that only took me just a handful of hours to read cover-to-cover, so it’s perfect for those with busy lives who struggle to find the time to read larger books.
And finally, a book by Steve Peters that’s less focused on trading per-se, but if read and understood will impact your profitability ten-fold;
If you’ve traded real money even just once, you’ll know how important it is to be able to manage your emotions and be indifferent towards money. Simply put, without this skill, you’re toast.
This book by Steve Peters will help you to understand how your mind responds in trading situations, why you’re mind is tricking you into making these emotion-driven mistakes and more importantly, when you understand this, you can stop making the mistakes, changing your trading for the better, instantly.
Again, all of the above books have hugely impacted my trading, and I hope they’ll do the same for you.