The mistakes one makes after years of trading are usually very different from mistakes on makes when beginning. We wanted to make a quick post to review our experience:
1: Noob level. Here the mistakes are the most gaping of all — not having visualized the trade in terms of risk management. This means going into a trade without knowing your risk. If you don’t master this you won’t last, pretty simple. So at noob level you need to figure out risk management. Most basic thing you need as a trader.
2: Semi-professional. Jumping from one trading strategy to another. Trend trading is working I am a trend trader! Reversion to mean time, this is me! Wow metals going crazy, love me some gold! When you’re still in the beginning stages it’s fine to experiment around to see where your strengths are and what jives with your personality but at this stage focus on being good at one strategy and really master it. Once that occurs then you can think of adding different strategies; this business is much too competitive and difficult for the survival of a jack-of- all trades.
3: Professional. Treating every tape as if it were the same. Some tapes are amazing for trend-trading and benign in that everything works, everything is forgiven. You have the Midas Touch. Then a week later same strategies fail at a much higher rate. This is your sign to hit the brakes. One of the hardest lessons for a trader is to not treat every tape the same.
For example using the same strategy (we are swing trend traders) we take X amount of trades a month. Next month it could be X + 15, and the month after? X – 20. It all depends on a) how many set-ups we find and b) mood of the tape. If everything works then pedal to the metal. If it’s choppy and we keep getting stopped, we retreat and almost take no trades. Every day is not the same. This is one of the last nuances that seem to plague traders — they constantly want to trade.
It’s been a while since we wrote an educational post — hope it offers some food for thought. See you on the streams. HCPG