Do few things extremely well. | stockbee

4/11/2016

Do few things extremely well.

If you are serious about specializing

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If you want to make money trading ,don't focus on too many setups . Do few things extremely well.
If you see most successful investors or traders they trade one time frame and one or 2 setups well.
If you talk to very successful traders they do few things well.
Some focus on day trading , some on swing trading , some on position trading Within that they specialize by a specific setup like pullback or breakout.
Successful traders stick to a style and setup for years. They might add nuances and change tactics a bit but their basic
Purposeful sacrifice is first step you need to do to narrow your focus to few things....
It involves taking a hard look at your style and only focusing on few things and abandoning some ideas.
The other key is not to get tempted by every new book or idea you come across and abandon your core approach.
Define your style and setup and then wait for it to show up.
Wait for your setup to show up instead of constantly changing your method
Define your setup in great detail.
Do all the thinking when you decide to trade a setup.
Convince yourself that you can make money using this setup logic.
Study thousands or ten thousand past examples before trading it. Get every detail about the setup etched in your mind.
Effort involved is significant in this but is one time. After that wait for the setup to show up and pounce.
As against that what you see day in and day out is traders flirting from things to things. This is especially a problem for new traders.
Brownian motion.
Someone says sector analysis is key everyone runs for them.
Someone says only buy beaten stocks and everyone runs to them.
Someone says buy mean reversion everyone runs in that direction.
Someone says rich get rich by buying beaten down stocks, everyone runs for it
Someone says pocket pivot again mad scramble to get scan for it.
Someone says John carter indicator, then everyone goes crazy for it.
In the process you are just flirting from one idea to another one setup to another, without getting in to depth of any one thing.
Monday to Friday if you rotate through 5 different setup ideas you will end up confused and frustrated.
You will never develop expertise on a setup with that approach. Setup selection involves purposeful sacrifice.
Lot of effort is spent in chasing mirage instead of mastering a setup.

Learn from this very good observation by Ed Seykota on setup

The lizard ... just hangs around on the rock ... and waits and waits and waits ... for his pattern to show up ... and when a bug comes along, he makes his move, right from the gut, without thinking about it.
Moral
When trader becomes that automatic, then he, too, can hang around on a rock and catch a lot of bugs.
Say take the 4% breakout setup I ave details and study it in detail and then decide is this what I want to do , then develop process around it and stick to the process, refine it and build small success with smaller position then move to next thing.
Or take the anticipation setup I have detailed and study it on say past 300 movers then setup process and then fine tune it and build success around it.
Or take the $ b/o setup I detailed here and focus on it.
Understanding and perfecting setups take time and effort.
If you keep flirting from setup to setup you will find difficult to master any.

2 comments:

enzo said...

thanks very true
Jack of all trades, master of none"

zen said...

well said.

~zen