We hear this phrase all the time…perhaps too much. Yes, it is important in our everyday life. But I submit that nowhere is it more important than in your trading life.
Think back to before you knew much about trading. Whether it was decades ago, or last week, I’ll bet that the phrase “day trading” conjured up an image like this:
Even once you knew that this wasn’t necessarily what it took, that you could trade from your living room in your pajamas, you may still worry that trading needs to be complicated. That before you enter a trade you must travel through a flow chart like this:
Before we go any further, I’ll let you in on a little secret that the trading world doesn’t’ want you to know (at least the ones selling trading systems).
It’s not about the system.
Stop. Read that again.
It’s
Not
About
The
System…
If you buy a trading system, often they are made to look complex, because if it was too simple, no one would pay for it. But (and here’s what is only mentioned in the fine print) it’s not the SYSTEM that makes you money. It’s your DISCIPLINE in trading the system. YOU are the key to success or failure. If you follow their system perfectly, you will have similar results. If you don’t, you won’t.
But that’s true of ANY SYSTEM!!! My main passion is teaching those who come after me to overcome their Trading Emotions. Nothing will work without overcoming them. And if you do…ANYTHING will work.
So, now back to our regular program. /rant off
If you are here because you are struggling with overcoming those emotions, that “Barrel of Monkeys” in your head…
…then you need to set yourself up for SUCCESS as much as possible. And a complicated system is not going to so that for you. In fact, it’s going to do the opposite.
We’ve talked about this before. The keys to trading success, in order of importance, are:
1. Proper Mindset/Trading Psychology
2. Risk Management
3. Trade Management
4. Trading System/Technical Analysis
Notice what’s last. That’s right, the System. The truth is that if you have #1-#3, you can be successful with almost ANYTHING as your #4. So while you are working on #1 (of which #2 & #3 are really a subset), give yourself a break. Pick a SIMPLE trading strategy to use.
Don’t believe me? Try this. Put a 20 period Simple Moving Average on a Daily Chart. Write down a very simple set of rules that include max risk per trade, total max risk, and how you will set your Take Profit and Stop Loss. Now go trade it on DEMO. Follow your rules 100%, and never deviate from them. Do that for 3 months. I’m willing to bet that you will end those 3 months with a positive return. It might be small, but that’s not the point.
I can’t stress enough how important it is to build a habit here. That’s all that Discipline is. Making the same correct decision, over and over and over again. Every day. Every time. Set a specific time of day that you will trade, and trade that same time every day. Without fail. Don’t trade outside that trading window. Go through your charts the same way every day. Set up all the trades the same way. Every day…every day.
At the end of 3 months, you will have created something that is SO much more valuable than money. You will have created DISCIPLINE. However, if you have a system that’s too complicated, you will burn out before the first month is over. You can’t learn to rewire your brain AND a trade complex system at the same time. Something will give way, and I’ll bet it will be the discipline.
There’s a legendary basketball player from LSU named “Pistol” Pete Maravich. (our Basketball Arena is actually named after him.) What made him legendary was his commitment to his skill. His father would drop him off every day after school at an empty gym, and he would shoot basketballs for HOURS by himself. When I say hours, I mean something like 5 hours a day, by himself, every day, from age 7 until he went to college. Say what you will about questionable parental decisions, what it created was muscle memory that was set in stone. He could make any shot, from anywhere, during any game because he had made that same shot thousands of times before.
This is what you are seeking to create. A trading discipline that has become second nature because you have done it SO MANY times before.
I trade every day at 3: 00 pm Central. I open my platform, check the news the next day, manage my open trades, go through the charts looking for new trades, take screenshots, then close the platform until the next day at 3 pm. This all takes me about 10 minutes. I do the same thing, every day. Open, trade, close, repeat. My system, though it looks complicated to an outsider, is just 2 indicators on a chart, and a set of rules telling me what to do. That’s it. It is VERY simple. And it’s that simplicity that enables me to trade the same way each and every day.
So I urge you…I beg you…pick some simple system at random, pick a time of day to trade, and start building that muscle memory. You can always swap out your system later. Once you get to the point where trading becomes automatic, honestly the system won’t matter much anyway.
I close out the same way every time for a reason. The immortal words of VP are so true, so valuable, yet so simple:
Trade your plan. Get out of the way. Repeat.
Until next time…