Sticking with the process

My historical win rate is about 30%, so with the majority of my trades generating losses, I have learnt to accept losing money along the way.

To me, what is far more important than the monetary outcome of any one trade is whether I am sticking to my process and my execution:

Richard Dennis, trend following and leaving your ego at the door

The siren call of the high win rate strokes the ego of many traders, and this causes internal conflict amongst people who aspire to be trend followers.

Left unchecked, the ego within us would make the desire to be seen to be right its primary focus, rather than to make money. But this goes against the grain when it comes to trend following, where the typical win rate can be between 30% - 40%.

Spinning your wheel(s)

A few weeks back, I spoke to a trend follower who had been experiencing a frustrating period in the market. This particular individual previously worked in the City of London and has a strong regard for good risk control.

My approach to blogging and tweeting

And now, in the words of Monty Python, for something completely different...

When I was at school, I always struggled with written exams. Not because I didn't know the subject, but because I was always very economical with the number of words I used. Examiners marked the answers down, simply because I didn't use the required minimum number of words, and the teachers were disappointed in the grades I got. It was a consistent theme throughout my school life.

My argument always was "why write 500 words when you can say the same in 50?"

The Pareto Principle

In the early 1900's, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. Since then, this basic principle has been applied to many aspects of life, business, management etc.

I even unknowingly referred to this principle in my e-book, in which I stated the belief that 80% of all trades taken would cancel each other out - small losses and small losses. It was the remaining 20% of the trades that generated the overall profit.