Over the last couple of weeks I’ve received a couple of great emails from traders who are making it full-time. On the opposite side of the ledger, I also received a couple of emails from traders who are falling behind – they were having some success but then started having losing weeks.
Well, time to find out what the trading success stories can teach us. First, here’s an email from Alex (name changed by request):
“Barry: Just a quick note of thanks. For everything. I’m incredibly impressed – not just with the indicators, but also with all the videos that provide very helpful market context, and most of all your willingness to share what you have observed and learned. When I started trading futures late last year, it was with your indicators.
I’m now well on my way to being able to rely on trading as a sole source of income.
While I continue to read everything I can, look at things from lots of different perspectives, examine new techniques, etc. I find that your indicators very neatly encompass all the ‘market-generated information’, are straightforward to use, and remarkably accurate. Thanks again.”
Excellent, full-time trading in sight. So what is Alex doing right/differently? What lessons has he learned that have made him consistently profitable?
“First, I’m not yet as reliably profitable as I need to be, but I can see it from where I am. What I now believe is that I have all the necessary tools.
I just need to get out of my own way – to control my fear and greed.
While there is a tremendous amount of domain knowledge one needs to acquire to be successful at this (not unlike anything else), trading is primarily a journey of self-exploration. Nothing else I have done (air traffic control, software development, managing a global team of 600+ engineers) probes my emotional weaknesses so thoroughly.”
We all know fear and greed intimately – but these comments are coming from someone with air traffic control experience! Think ice cool. Personally I’m too emotional – and need to be more systematic.
“Since starting to trade futures late last year I have tried to absorb all I could from many sources. From my perspective, there are two major camps: the indicator/technical folks and market profile folks.
I have found nobody else in the indicator camp who has taken the approach you have: looking at the three independent variables to synthesize a portrait of what is happening at the moment. I find this extraordinarily useful.
I also believe there is merit in the market profile perspective, which essentially says ‘the history of volume traded at a particular price is significant’. What is fascinating is how well your indicators capture a large portion of that static, historical information dynamically.”
I’ve never taken the time to study market profile – but agree volume traded at previous price points must be significant. So maybe some homework for me. If anyone has any recommendations on books or software, let me know and I’ll pass them on.
“Probably the biggest lesson learned thus far is that my biggest edge is actually ‘not trading’ – learning to wait. Very hard to do, when you see the market moving and you feel like you ‘know’ what will happen next.
Years ago, while grappling with a go/no-go decision for an instrument flight into crappy weather, my flight instructor said ‘Remember, there’s nobody shootin’ at ya – you don’t have to go’. True for trading as well. So now I (mostly) wait for what I believe are high probability setups, in which multiple timeframes agree on direction.”
Yes – over-trading will kill you. There’s almost always a retracement and a better place to enter a trade. No need to chase the market. And if you don’t feel like trading – don’t.
“Next would be managing risk. All that stuff one reads when starting out about risk management being key is correct. Without a clear plan for risk management it is very easy to have your account vanish while waiting for the market to adopt your perspective on what *should* be happening.
I now take my losses and move on.”
Agree, whenever I take a trade I’m prepared for it to be a losing one – and I’m not risking so much that it’s painful. Yes, it hurts but I can handle it and it doesn’t put me under more pressure for the next trade. There is nothing wrong with trading 1 contract. It’s not about the money you could make – it’s about the money you could lose.
“So while trade selection and risk management are key, they are also obvious. My biggest surprise is that my struggle now is actually exits – the one area I did not even have a plan for (coincidence?).
I virtually always exit good trades too early. It is very hard to sit through a retracement of 2 or 3 points rather than taking the money off the table.
I tell myself I’ll get back in later at a better price following the retracement. Inevitably I find during a postmortem analysis that I would have been better off just riding it out. This is now my key area to work on.”
If you’ve got the trend direction right it will all work out OK in the end. I’m pretty stubborn and some people think a 4 point stop is crazy. When it’s going against me I keep on looking for evidence that I’ve got the trend direction right.
“At this point it appears that I can fairly reliably extract 2 points of profit daily, on average. But while you seem get your 4 points in the first hour, it takes me all day to get my 2 points. So your efficiency is about 12x mine. And I have a goal to shoot for. Thanks!”
Averaging 2 points is awesome – just make that in the first 45 minutes of trade and you’ve got yourself a perfect job 🙂
Alex, thank you so much for your emails and taking the time to share your thoughts. Look out for more trading success stories coming soon.