I have been fortunate to have had a great string of success trading over the past decade from 2003-2013. How I trade today was primarily learned by making mistakes in the late nineties up to 2002. I have always had a knack for getting on the right sides of great trends at the right time. I have always been very risk averse cutting losses quickly. My issues have been trading too aggressively and underestimating the risk of losses with a whip saw and volatility expansion while having on too many positions at one time. I have become more and more risk averse as my accounts have grown over the past decade and phased into being an option trader in recent years in my trading account. It has been a heck of a ride and we are never truly masters of the market just students. Past profits are no guarantee of future profits all we can do is follow our trading plan and the market moves decide our profitability. Here are ten things that I have learned the hard way over the past ten years in the stock market.
“The game taught me the game. And it didn’t spare the rod while teaching.” — Jesse Livermore.
- The best way to make money in the stock market for me is to trade in the direction of the trend on the time frame I am trading.
- For me my annual profitability comes from a few big nice trends I catch. My job is to find those trends and keep the losses small as I look for them.
- My best trading is when I just trade the chart price action, my opinions interfere with my profitability.
- Some of my best decisions has been to simply take my account to cash and wait for the market to give me a signal.
- My best trading is when I trade only the open and the closing hour of the stock market. I do better to avoid much of the intra-day noise and take end of day signals and sell long option positions in the morning.
- “Trading is an endless evolution of the trader and their system.” -Jonathan Keag. While the principles of risk management, robust method, and discipline stay the same I continually look to become a better trader.
- The primary key to my compounded returns and capital appreciation over the past decade has been by limiting draw downs in my primary trend following accounts.
- A good trading plan is a far more profitable tool than asking other traders for advice.
- A single trade has no meaning outside a trading plan and methodology. “That which came with the help of luck could be taken away by luck (and often rapidly and unexpectedly at that). The flipside, which deserves to be considered as well (in fact it is even more of our concern), is that things that come with little help from luck are more resistant to randomness.” -Nicolas Nassim Taleb
- The key to successful trading is to trade a robust trading system with discipline and perseverance while managing risk. Most other things are just noise.