The Trading Process Part 1
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The Trading Process
What you will learn in this article.
- Styles of trading
- Mastering your strategy
- Pushing yourself to improve, surpassing limits
Styles of Trading
I want everyone to think really hard about what their perception of trading is. What is your true goal? Most people would say well to make money, that is obviously why most get drawn to this world. However do you truly have what it takes to play this game? What are you looking to achieve? This industry is filled with misinformation for good reason. Brokers want you trade more because they earn money from you. Others want to sell you some magic indicator that makes you rich. With all this noise, how do you find the true essence of trading. You have to go into the past. Humans have and will always continue to be buying and selling. The true art form of trading starts at the most basic level.
The way you generate an idea and approach each trade is your formula. Focusing on your formula and process first, and profit will come. If you enter this world with the dream to make serious money without the enjoyment of the process you will inevitably fail. Of course you may occasionally hear a gambler’s story about some crazy trade and how they achieved fast money, however they do not last. If they stay on their current path gamblers can only survive until they eventually go bust.
Example of the Process
Example 1: Lets say you fund an account with $1000 and over the course of the week you double it and now it’s $2000.
Which trading process did you use? Pretend for just a moment that what you deposited was $100,000 or better yet $1,000,000. The strategy you used, is it able to be repeated? Is the formula able to scale up this level of capital. This is the first thing that should come to mind when creating a strategy. (More on creating a strategy at a later time). Most people who make it to the top % have a vision. If your plan is to gamble $1000 to $2000 for the rest of your life then these tips will not be of use to you.
Risk is what defines your profits. Your goal is to find ways to lower risk while increasing returns. Always refining and forging your edge as if it is a sword. A quote from trader Andreas Krenow says this…
“It’s all about vola control. This business is not about who had the highest percentage return at the end of the year. It’s about how you made it, at what vola. Volatility is the currency we use to buy performance. You want to spend as little vola as you can to buy as much performance as you can.”
Mastering One Strategy
New and experienced traders alike sometimes fall deep into this mindset. You can not be a jack of all traders master of none in this space if you want to compound your account starting off. You have to find a strategy and style that you want to start with. Its like a swordsman suddenly trying to learn a new style after he makes a mistake, entering a never ending cycle. Once you understand your trading style and perfect a strategy then you can start to add more to your arsenal. This can include combining setups, adding confluence with indicators, patterns, and it really is limitless to what you can achieve.
The problem is most traders get caught up in the noise. They never end up finding a style, or even coming up with a strategy. They are lost in the abyss of this space. Before you enter a trade you should know exactly how it will make you money. The idea should be fully formed before you click that buy or sell button. Its worth noting that at the end of the day, no matter who it is on the other side. They are clicking that buy or sell button just the same as you are.
“ I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times”. -Bruce Lee
In conclusion, traders should find their style, and work towards mastering a strategy first. Log all the performance and data you find for the strategy and how it applies to your style. Once you achieve this you can work on optimizing it and adding more variables. Remember this process as it will set you up for hopefully many more strategies and ideas in the future.
That sums the article for now. I will be touching on the various styles of trading and will be sharing a few strategies for each in future posts. For now I hope this was a good starter piece. Please let me know if you have any feedback.
Authored by WildWestTrades.