I’ve traded for quite some time now.
I just passed the two year mark trading full time, the five year mark since I started day trading heavily in 2011, and the 13 year mark since I opened my first trading account with Scottrade at age 18. I’ve said many times on this blog that I’ve had ups and downs over that time period. I’ve wanted to quit multiple times and have gone through drawdowns I thought I would never get out of. I struggled for years to build a system that worked and even when I’d finally built one I didn’t know how to maintain it. One thing that’s certain though is that my persistence has paid off. I’ve made many great trades over the years (and many terrible trades) but I want to take a moment to tell everyone about my greatest trade ever.
My greatest trade ever wasn’t hugely profitable. It wasn’t something I bragged about to friends or family and it wasn’t some glorious manifestation of my own intuition in the stock market. In fact my greatest trade ever wasn’t a buy or a sell in the stock market at all.
My greatest trade ever was the trade I made between chaos and discipline within myself.
It wasn’t something that happened overnight but rather over a period of months, years, maybe even decades. For the longest time I thought trading stocks was all about making money, living a lavish lifestyle and magically spawning ridiculous amounts of money out of thin air by doing little to no work. Under that misconception, my trading was chaotic and unpredictable. I followed other traders into their trades blindly and bought and sold randomly. I ignored stop losses and sometimes didn’t even plan to use them in the first place.
“I don’t need a stop loss. I’m gonna be right anyway. It’s not a loss until I sell it.”
Even after I had learned a lot – I knew which chart patterns I wanted to see, which types of stocks I needed to trade, which market environments I needed to trade in – I still didn’t see the results I was looking for because I would make little exceptions here and there which, over time, added up to a lot of needless losses and frustration. I was all about the money and not at all about the process.
Then, about 4 years ago some things started to click. I noticed that whenever I really focused and really did what I told myself I was going to do, I saw the results I wanted. Over time I slowly calmed down and started to make my trading more systematic. I collected data on everything and ran the numbers to see what I was best at. Not which ten things I was best at, not which five things…that one thing I was best at. Then I would make a goal to only do that one thing for a few days with no exceptions.
It was really difficult for me to sit there and watch all the concepts I’d learned over the years materialize into what “would have been” incredible trades if only I were involved with them. It was incredibly painful to watch that happen while telling myself I wasn’t “allowed” to take that trade because my data showed that I wasn’t good at it, but I’d do it just for a few days at a time to prove to myself that I was right about what worked and what didn’t. Instead of trading everything, I’d trade only one concept and collect the data on it in order to isolate the success level of that particular concept. Over time this became second nature. I did it for longer and longer periods of time until it was the only way I traded. I began to see amazing results. I had traded chaos for discipline – my greatest trade ever.
There is no greater factor in determining your success or failure as a trader than your discipline in sticking to a system.
The only way to know which system to stick with is to have the discipline to slow down, collect the data, run the numbers, and then do only what you’re good at. In this business you need something you can depend on. Once you have your fallback you can experiment and add weapons to your arsenal. Without discipline though, you’ll never get the chance to even try.
Over time, I've spoken with many, many traders and since I began trading I can tell you that the one thing I see in almost every single one of the traders who aren't finding success is a lack of discipline. If they trade chaos for discipline, they realize that trading isn’t that difficult. You just need to find something you’re comfortable with and do it over and over and over again. So, if you’re struggling with trading and feel like you have reached your wits’ end, or if you just want to tweak your trading, collect some data and use it to build a system that works, and then stick to it. If you need help, shoot me a message at firstname.lastname@example.org and let's chat about it.
Here’s to a great 2016 and happy trading!