Sunday, January 31, 2016

Refining your own approach

In my garage, I have a dustbin full of old golf clubs. Mainly these are putters that have been tried for a short while before being discarded. As it is, I keep going back to a putter that I bought more than 20 years ago. Now, over time it has gone through many changes - the length of the shaft has been altered, weight has been added to the putter head, and there's been numerous changes backwards and forwards to the thickness of the grip.

While the 'old faithful' felt good to me when I originally bought it, those various changes have helped refine and 'personalize' it to my own preferences and mindset at that time.

After making any changes, I would practice with it, to see if it felt comfortable and the changes had the desired effect. If it did, then I would go and use it in competition, and see how the changes worked when it mattered.

To me, this is no different to how my own method trading has evolved over time - on my Influences page, I list some of the traders and Market Wizards who have had a positive impact on my trading and my method.

Even now, I make small changes or refinements to my own rules, and how I scan for potential set ups. Nothing is ever set in stone. And it will continue to evolve going forward. Initially, by looking at hundreds (if not thousands) of charts, referring back to previous trades taken (or missed), before putting any changes into practice with real money on the line.

What I try and avoid however is making continual changes on a regular (e.g. a daily or weekly!) basis. You need time and a reasonable sample of trades to be carried so that you can analyse the results of any changes, and see if further refinement is needed or desired.

Even people I know who come to me and say "I want to learn how you trade" and resolve to use my exact rules, end up changing them to suit their own needs, beliefs or requirements.

I can pretty much guarantee that everyone I have given 1-2-1 training or mentoring to has made changes - maybe to how I enter positions, or how I trail my stops. Some I know have purposefully changed the timeframe (shorter or longer) to suit them and their current work commitments. Others have removed some of the criteria I place reliance on when scanning for setups. Others have added new criteria that they feel are relevant.

Sometimes seeing things from a different perspective or point of view can benefit you. I know I have learned from those traders who have taken my basic method and then changed certain elements. But my basic overall concepts and beliefs have remained unchanged.

The thing is, no one person can say how you trade can be wrong. If it has an edge, and delivers positive results allied to good risk management, then that is the right way FOR YOU to go about trading. You may have certain rules that other traders may frown upon and say don't work, but they don't know how that one element may interact with your other rules, your attitude to risk, and most importantly your trading mindset.

Developing a method that generates positive expectancy, that you are 100% comfortable with and can follow with a high efficiency rate - that should be your holy grail as a trader.

I would far rather someone traded a method that maybe had a less optimal positive expectancy, but they feel comfortable using and can stick to the rules, instead of trying to use something that theoretically may generate better returns, but they frequently second-guess and can't follow to the letter.

There are lots of people out there who say trend following doesn't work. Those who profit from trend following would obviously disagree. Similarly, there are those who say that picking tops or bottoms in markets doesn't work (quite probably the trend followers of the world!), but there are people out there who can make it work - for them.

Remember this all helps in creating a market of buyers and sellers, so you shouldn't knock other people who trade in a different manner to you. It may just be that they have a different skill set to you, or a different mindset and set of beliefs, and can make money in a way that you can't.

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