With respect to trading, if someone were to ask you what your niche is, could you answer?
Many traders couldn’t. That’s why many traders aren’t consistently profitable. Over the years I’ve learned countless strategies and studied hundreds of trading methodologies. I’ve spoken with, visited and traded with so many traders I’ve lost count at this point. In this age of information sharing and social media it’s easy to become overwhelmed and overloaded with too much content. There are books, DVDs, blogs, live courses, mentoring, you name it. Much of it is free or low cost which is great, but that also means the market is potentially saturated with bad information or just plain too much stuff. The effect is that most traders bounce around from strategy to strategy, absorbing everything they can and trying to implement it all. This is a problem because given enough strategies and enough information, we can find an excuse to trade anything which means we will ultimately achieve mastery of nothing. As the great Warren Buffett once said:
“You don’t have to swing at everything. You can wait for your pitch.”
So what’s the pitch that you’re waiting for?
Finding your trading niche can be a long process. In fact, it is a long process. There’s no getting around the fact that you need tons of screen time (years of it) to really find out what you’re good at. For some it might be selling short vs. buying long. For others it might be trading a certain price range or a certain volume limit. Maybe it’s trading a specific pattern or a certain sector or industry. It doesn’t really matter what it is. The goal is simply for you to identify your trading niche so that you can then capitalize on it. But how does one find their niche? With so much information out there and so many things to try, how do you know what you’re really good at? I’ll give you a profoundly simple hint:
Your niche is most likely what you were already comfortable doing.
That’s right. It’s just what you were already good at. It’s what comes naturally to you. If you think back over all the trades you’ve taken in the past couple of years, there will be certain trades that stand out. They may not stand out just because you made money on them, but rather because when you made those trades you had absolutely no doubt that they would be winning trades. They’re the trades that you just knew would work (even if you were ultimately wrong). Maybe you couldn’t even explain why, but you just had a gut feeling and it seemed natural to you to take the trade where/when you did.
To identify your best trading strategy, think back over the trades you’ve taken over the last couple years and make note of the ones that stand out. You shouldn’t have to look for them. You should be able to pull the tickers out of the back of your mind and remember the trades without even looking at a chart. You should be able to tell someone approximately when you took each trade, what price you entered, what price you exited, how long you held, and why you traded it the way you did. Forget about the money you made or didn’t make on the trade. It’s actually irrelevant. What matters is that you can remember the trade and why you took it vividly, and why you were so confident that it would work. That’s going to be your niche.
Trading is a mental game. I’ve always felt that trading was 95% emotional management and only 5% skill. Anyone can draw lines on a chart or identify patterns, but only a select few have the emotional control and discipline to know what to do with those patterns, and which ones are worth acting on (hint: most of them are not worth acting on).
For most traders identifying their niche will tell them what they need to do. Profitability, then, is as simple as disciplining yourself to actually do that. Trade only your niche setups with size. Everything else should be paper traded or traded with experimental cash that you’re willing to throw away (though if you were going to throw it away on experiments anyway you may as well just drop it into my PayPal account and I’ll happily use it to trade my niche).
So what’s your niche? I have three: