Should you trade one strategy, or more than one?

And if so, how many, right?

Well, our first suggestion; Never keep all your eggs in one basket.

Why? Because if the basket falls to the ground, all of your eggs will shatter leaving you with nothing. In the same way, we as traders should look to diversify our trades, across both strategies and markets, instead of putting all of our money in one single place. Diversification, if you will.

Now, doing this is proven and it’s increased the chances of survival for many, even during highly volatile market conditions. It’s the reason property investors don’t just own one single property, or why a golf player doesn’t have just one golf club. It’s all about spreading your risk, and opening yourself up to opportunity.

The concept that we want to introduce today is ‘strategy diversification’ and the concept is undoubtedly a key element in managing risk in the financial markets, whether you’re trading stocks, foreign exchange markets, commodities markets, whatever instrument you choose.

Now, you may ask, why do I need to diversify my risk and the strategies I trade? Does that mean I’m going to lose in one market and win in one market, thus making my gains small and my progress slow?

Well, the question is a valid one and an important one. It shows that you understand the big picture, and we’ll answer the question together by introducing another concept called ‘risk diversification’. Risk diversification allows us traders to mitigate the risk of huge losses in case the market suddenly moves against us. To dive deeper, we need to consider combining markets to aid diversity or currency correlation considerations, time-zones issues, timeframe suggestions and which timeframe fits traders best, ok.

So, when deciding which markets to trade, we need to understand the concept of market-correlation. The topic is rather complex but it is very important to understand because this will distinguish you ahead of the majority of other traders out there who either don’t know this, or who ignore it.

So let’s list some examples of market-combinations for you to study.

Firstly, Crude Oil and Canadian Dollar pairs – The price of oil and the Canadian dollar are negatively correlated. This means that when oil prices rises, typically the price of the Dollar-Canadian Dollar will fall.

Secondly, Gold and the Australian Dollar with the United States dollar currency pair. The price of Gold and the Australian Dollar are positively correlated. Australia has a big influence in gold mining hence when the price of gold rises, the Australian Dollar versus the United States dollar will also rise.

And thirdly, the Japanese Yen and the United States stock market. Japan is known to be a country with very low interest rates; Hence it’s the most desired currency for borrowing. Traders generally will borrow in Japanese Yen to take advantage of the low interest rate, convert the Japanese Yen borrowings into US dollars and then invest in the stock market. As such, there is a positive correlation between the United States Dollar with the Japanese Yen, alongside US indexes such as the S&P 500 index.

And just as a side-note, we’ve added a reference here, this being the Blackwell Global research piece, titled ‘Risk Diversification In Forex’: https://blackwellglobal.com/risk-diversification-in-forex/

Next, let’s discuss time-zones. As we’re all aware, the forex market is a 24-hour market, and there are 3 important sessions during the day, those being the Asian session, the London session and the New York session. For traders in Asia such as in Singapore, Tokyo, Hong Kong and Australia, the currencies in focus would likely be the AUD/JPY, USD/SGD, USD/JPY, NZD/USD and NZD/JPY.

By applying the currency correlation concept above, traders in this part of the world can choose to trade during their time zone and still take advantage of market volatility during the Asian sessions. In term of applying our own WBTrading strategies in Asia, traders can consider applying the Price Reversion strategy to the Australian Stock Index as one example of where this edge performs incredibly well and produces sizeable, frequent profits. And for those who are already clients, you can find this data inside the ‘Price Reversion’ segment of the course-contents inside your account.

At this stage, our content writer Azri wanted to share his favourite strategy, the ‘Higher-Timeframe Bias Bar’ strategy, which can also be used during the Asian session. As a trader based in Australia, Azri’s favourite currency pair to trade is the AUD/JPY and the NZD/USD. He focuses on these currencies as it provides him with exposure to 4 major currencies which are the Australian Dollar, the Japanese Yen, the New Zealand dollar, and of course the mighty United States Dollar. Having positions in both currencies helps with the currency correlation as well.

Next, let’s discuss timeframe suggestions and which may suit a trader best.

Many traders, including Azri and myself too, have a busy life. We all do, right. And Azri is also happy to share that he’s just welcomed a newly born baby boy in to his family as well, which was great to hear. He’s Azri’s third child, along with an 8-year-old boy and a 4-year-old daughter. As you can imagine, life can certainly be hectic for him!

Now, he did mention earlier that his favourite strategy of the four key strategies that we trade here at WBTrading is the ‘Higher-Timeframe Bias Bar’ strategy, and because of how easy to trade and how hands-off this edge is to trade, requiring just minutes per-day, this strategy works well for him in his busy everyday life. He just has to check the charts every 4 hours, due to using a four-hour timeframe, and he also focuses on just two currency pairs.

This solves the time-zone issue and the currency-correlation issue and also the having a busy life issue, too. All in one strategy, every problem is solved. And since we’re on this topic, I’d like to talk briefly about the concept of ’less is more’. See, many traders out there think that in order for you to make money as a trader, you have to open lots of positions, on many markets, through each trading day, and you have to make hundreds of trades a month, and so on.

For Azri, it’s all about quality over quantity. Now, for those who are clients of ours, we all have two short-term intraday strategies and two longer-term swing-trade strategies at our disposal, and this is more than enough for us to be consistently profitable traders, as we all are. The key is, as I mention continuously, letting the probabilities play out, letting edge play out. And in Azri’s experience of using our WBTrading strategies, along with being disciplined in his risk management, the results always come.

If you think about it, every time we lose, we lose just -1R and when we make a profit, we make many times this. Sometimes well into the double-digits. And in Azri’s case, via the Bias Bar strategy, when he is right he makes +3R which is the target he likes to use.

Since January 2021 to date, he has grown his account to +15R by just doing the exact same thing every day. Every time, he just places a trade, and he considers the golden rules; One, he risks no more than 1% of his capital, and two, he takes profit at +3R via the Bias Bar strategy, and checks his charts every 4 hours only, just for a minute or two. In essence, his trading day is just minutes in length, and he’s profitable continuously. Let me ask, how many minutes or hours do you trade every day?

If it’s longer than a single hour, in many cases, you’re actually doing something wrong!

Now, for people busier than Azri, we have good news for you, too. The daily time-frame can also be used to trade the ‘Higher-Timeframe Bias Bar’ strategy. Granted, you may not be in an open-position all of the time, but you do have the luxury of having a larger stop-loss allowing you to weather short-term fluctuations in prices.

And as an added resource, participation in our ‘Mechanical Alert’ group, which is open for clients-only, can be useful too, as our trader who runs this does all of the work for us in finding trades, making us aware of the orders he’s placing, and so on. All we need to do is literally copy his trades all day each day. Again though, this is not available publicly, it’s simply an add-on for existing clients. Azri also mentions that he’s been very impressed with the trader’s performance.

Now, before we end, Azri wanted to address a trading consideration for any America-based traders. This being, that the Session Momentum strategy can be utilised with the S&P 500 index with favourable results. Again, we’ve added the relevant data to the course portal for you to illustrate this.

As for our Price Reversion strategy, again, the ASX index is also suitable for America-based traders as the reference time is using Sydney’s timezone. So, you see, for America-based traders they can trade in the morning using perhaps the S&P 500 index, they can then go to work, spend time with their families and then in the evening they can trade the ASX index, too. And in between of course, they can check for Bias Bar trades via United States dollar-based currencies, meaning very minimal screen-time, very profitable results long-term, with very little stress on top.

It doesn’t get much better.

So, what to do next; Make sure that you aren’t trading correlated markets. It’s a big no-no. Make sure you’re trading with edge, and if you aren’t, we can help. Head over to our website, and you’ll find our strategies there waiting.

Anyway, we hope that helps, we hope that’s added value for you, and from me and the team here at WBTrading, trade with edge, with consistency and have a great rest of the week.

– To your success.

WBTrading team.

What Separates Winning Versus Losing Traders?

What do you think separates winning traders from losing traders?

I’ll say one thing…

No-one comes into trading excited to work on risk-management and discipline, they’re not very exciting are they. But quitting the rat-race? Working for yourself, from home, on your own terms, and having the ability to literally make a living via a computer and an internet connection?

That is exciting.

And all of that is possible when you’re consistently profitable, but, not until you can understand and respect risk-management and most importantly, discipline.

Let me ask you a question. And alongside your answer, think about the results you’ve seen within your trading recently…

When you take a trade, do you know exactly where, when and why you’re getting in, and do you know exactly where, when and why you’re getting out?

Now, if you’re thinking:

‘Yes, I do know those things, but I don’t quite do that’,

And maybe you’re a trader who doesn’t quite run trades to target. Or maybe you move your stop to break-even, get stopped, then watch the trade run on to target. Or maybe you’re a trader who skips trades because although your trading plan says you should be taking them you don’t quite ‘feel’ right about them, you second-guess yourself and so on.

Or maybe you adjust your stop-loss and end up taking a bigger loss than you should have on a trade, and this is negatively affecting your edge, etc.

If you’re doing any of these things then I’d imagine that you most likely aren’t profitable. But, the thing is, saying that,

You shouldn’t actually feel bad about it at all, because you’ve just inadvertently identified why you aren’t profitable yet, and that’s because you’re making these mistakes, so – And I know this sounds simple, but honestly – If you can just remove these stumbling blocks, you’re a profitable trader.

As long as you have a strategy that provides edge, literally all you have to do is trade well, with consistency and without making any of the above mistakes. It really is as simple as that.

The thing is I’ve been there, I’ve made these mistakes myself. I’ve exited early. I’ve mis-sized positions and taken bigger losses than I should have. I’ve got in late and then hit target but skewed the reward. I’ve skipped trades out of fear and then watched them run to target, …

And on and on and on.

But thankfully the thing that saved me was:

Keeping a checkable, verifiably log of my strategies’ trades.

In fact, it’s the reason why I share the trade-log for every one of my strategies with my clients inside our programmes. So that they can see that the strategies are profitable before using them.

And after seeing them work on paper, after checking this and confirming this?

They trade with so much focus and confidence that the money makes itself.

Now, journaling is easy. Identifying the mistakes is easy. It’s removing them that’s the hard part. But if you can just do one month or one quarter where you literally follow your strategy rules to a tee, and see the results, see the money start to come in, it will change everything.

The confidence that you’ll take from that can really change your trading.

So, where to go from here?

Use your strategy rules to build a sheet showing last weeks’ trades. Last months’ trades. Last quarters’ trades. And prove to yourself that your strategy works.

From there, with that confidence and verification done and in-mind,

Just follow your rules. Every day, repeatedly.

And the money really will take care of itself.

– To your success.

Will.

p.s. Don’t have mechanical rules yet? If not, grab mine here.

The Only Way To Guarantee Success

One of my mentors once said to me;

Will, if you want to succeed, …

– Make a list.
– Do the list.
– When?
– Now.

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.

Example:

– 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:

– Make a list.
– Do the list.
– When?
– Now.

This is the only way to guarantee success.

Anything else is a waste of time, energy & life.

—To your success.

Will.

p.s. Thanks as always for the inspiration, Andy.

Is Trading Skill, Or Luck?

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.

…what happened?

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.

Unlucky?

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.

– William.

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.

Line

Recommended Reading 📚

In an effort to help you carry on learning and growing as a trader, I wanted to recommend a few books that I’ve read that have hugely impacted my trading career.

The below books changed my trading irreversibly, increasing awareness, skill-set, and in turn, my profitability.

I’ve listed them in order of helpfulness, how much value each book has added for me, and how much each has impacted my trading and profitability.

Let’s begin with two of the most important trading books I’ve ever read, hands down, the first written by Edwin Lefèvre and the second by Jesse Livermore;

Reminiscences Of A Stock Operator

How To Trade in Stocks

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 PlayBook: An Inside Look At How To Think Like A Professional Trader

One Good Trade: Inside The Highly Competitive World Of Proprietary Trading

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;

The Essence Of Trading Psychology

Zero To Hero: How I Went From Being A Losing Trader To A Consistently Profitable One

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;

Trend Following

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;

Market Wizards

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.

As the saying goes;

“Only a fool learns from his own mistakes. The wise man learns from the mistakes of others“. The above book will enable you to do just that.

Next, if you’re a trader that has a strategy in-place but has struggled with psychology, execution, trade management and the likes, this book by Harvey Walsh might just change everything for you;

Brain Hacks For Traders

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;

The Chimp Paradox

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.

– William.

Line