Stick to an approach | stockbee

12/27/2013

Stick to an approach


Stick to an approach

If you have a valid setup idea and then if you stick to it for long period of time it works.

Sticking with a setup idea for long period allows you to master it and fine tune things.

Sticking with an approach does not mean sticking to exact parameters of a scan or trading mix but it means broadly keeping your logic behind the trade constant.

If your approach is breakout based, if you stick with it, over months , trades, years you gain valuable insight in to the setup and you will become good at it or will know when to be aggressive and when to be cautious with your setup.

One of the constant temptation in trading is to completely abandon an approach and jump at every new idea you hear about or read about in book or on some site. The grass is always greener on other side. People who constantly do it gather no enduring edge.

One of the other thing wonderful about the market is that most of the approaches that work are in public domain and have been around for hundreds of years.

Breakouts based trading has been around since markets started.

Pullback based trading has been around since markets started.

Growth investing has been around since market started.

Value investing has been around since market started.

Contrarian investing has been around for hundreds of years.

Trend following has been around for years.

For a short term traders the two most common approaches are breakouts and pullbacks. Traders have developed variations of these two approaches. Those variations involve small nuances. But the basic setup remains intact. 95% breakout +5% nuance or 95% pullback with 5% nuance is the most common approach.


Most people do not have patience to stay with an approach. They give up at first hint of trouble or when things don't work for a period of time they abandon the complete approach.

As a trader you have to be willing to persist with an approach, many trades may not work, in a year there will be months when you will feel miserable but if you follow a setup by end of the year you might be more than compensate for that period.

Stick with an approach for sufficient number of trades or months.

One of the benefit of methods traded here is that you will have very little draw downs if you follow my approach. If you see over years the approach has been to take as little risk as possible and yet compound the money.

Drawdowns can drain your energy and put you offtrack. Low drawdown methods allow you to stick with method and gain confidence.

1 comment:

Jiang Bowei said...

Thanks for sharing this picture. One picture is worth more than a thousand words.

I can see your high skill in the swing trading. A steadily rising curve with minor pull back.

For new traders, this kind of consistent result should be their No.1 goal. Once you achieve this, you can always fine tune the system for better gain.

People are easy to focus on explosive profit of other people before they could get consistent result. It will lead to disaster to both account and people's confidence.

Most of people like Jessie Stine blow away their account several times before get the explosive profit. If you do not want that, you need to learn to be consistent first then try their ideas.