I want to start a discussion on the most important factors in your success as a trader. Is it the method of trading that makes the results? Or does the person behind the method have a larger impact when it comes to the bottom line?
I'll start off by saying that both are important. The method provides a framework for the trader to view the market, and is a way for defining opportunity. No method is perfect but for any given market there is a method that fits the price action, and likewise there is also a method that is out of synch with price action. When traders book consistent losses I have to conclude that it is a result of implementing a faulty method. A losing trader is simply doing things in the wrong way, while a winning trader simply does things in the right way and at the right times. Some of that may be the method that is being used.
But often consistency (in losses or profits) is a result of doing the same things under the same circumstances. For instance, a trader who shows slow steady growth to the account with the occasional 50% drawdown is probably taking consistent core action that leads to this type of behavior. Changing the behavior can lead to removing the big devastating drawdowns, and leaving the trader with the slow steady accumulation. I think this aspect of trading comes down to how the person reacts at the gut level to different pressures. The markets do a great job of exerting maximum pressure on the participants at large. The trader who cycles from consistent small profits to 50% drawdowns is probably trading too large of size during those big drawdowns as a result of a faulty (and likely ingrained) decision pattern, and getting burnt on a few trades that take the equity down. Keeping size down in these few situations instead of adding to losses would likely solve the problem. Many other scenarios exist.
In conclusion I think that both man and method are important, but it is probably easier to focus on the method, since it can be objectively observed, while changing gut reactions to external pressures that only occur on occasion may take a lot more work. From my own experience it is very worthwhile to do, however. In the end I feel you need both a good profitable methodology as well as the ability to react in the right way to the external pressures in order to make it consistently as a trader. Add to that perseverence, and a strong conviction as well as adaptability and the ability to spot and take action on the opportunities that present themselves, and you have the qualities that make a profitable trader.
What are your thoughts?
I'll start off by saying that both are important. The method provides a framework for the trader to view the market, and is a way for defining opportunity. No method is perfect but for any given market there is a method that fits the price action, and likewise there is also a method that is out of synch with price action. When traders book consistent losses I have to conclude that it is a result of implementing a faulty method. A losing trader is simply doing things in the wrong way, while a winning trader simply does things in the right way and at the right times. Some of that may be the method that is being used.
But often consistency (in losses or profits) is a result of doing the same things under the same circumstances. For instance, a trader who shows slow steady growth to the account with the occasional 50% drawdown is probably taking consistent core action that leads to this type of behavior. Changing the behavior can lead to removing the big devastating drawdowns, and leaving the trader with the slow steady accumulation. I think this aspect of trading comes down to how the person reacts at the gut level to different pressures. The markets do a great job of exerting maximum pressure on the participants at large. The trader who cycles from consistent small profits to 50% drawdowns is probably trading too large of size during those big drawdowns as a result of a faulty (and likely ingrained) decision pattern, and getting burnt on a few trades that take the equity down. Keeping size down in these few situations instead of adding to losses would likely solve the problem. Many other scenarios exist.
In conclusion I think that both man and method are important, but it is probably easier to focus on the method, since it can be objectively observed, while changing gut reactions to external pressures that only occur on occasion may take a lot more work. From my own experience it is very worthwhile to do, however. In the end I feel you need both a good profitable methodology as well as the ability to react in the right way to the external pressures in order to make it consistently as a trader. Add to that perseverence, and a strong conviction as well as adaptability and the ability to spot and take action on the opportunities that present themselves, and you have the qualities that make a profitable trader.
What are your thoughts?