I also posted these on the excellent forum traderslaboratory.com.
Let me start by saying this style of trading is not for everyone. I expect a lot of criticism and people to tell me I’m doing it wrong. I pretty much break every trading “rule” in every trade. More on that later.
Let me also say I’m not selling anything nor am I a vendor, nor do I accept “donations.” This is all free for the sake of discussion and creative thinking. I have a website and a Twitter account but there’s nothing for sale on any of those, either, and all I really do on them is call trades and write about how to avoid trading scams. No one is going to steal my edge and prevent me from making money unless they somehow manage to make the market go up forever without ever retracing in which case my retirement accounts will thank them.
Let me start by talking about my “edge.” I hate that word because it gets thrown around all the time on the forums by people who don’t always know what it means (the same people who calculate risk/reward after the fact).
My edge consists of:
Account size – I know there are stories of people starting with a $10,000 account or whatever and building it up to $1M. I’m sure that’s possible if you can predict direction, but I can’t, and this is not one of those stories.
Discipline – I don’t have trouble following rules. I’m also patient. Some of you may have been following my journal thread for the last few years on another big trading forum where I’ve posted live calls for every trade and remember a point when I was sitting on around -$60,000 of drawdown and everyone was telling me I was doing it wrong and I should close the trade before it gets any worse and etc. I didn’t care. I sat through big drawdown for a while, collecting dividends and profits from hedging the other side (more on that later) in the process, and ended up closing the trade for over $40,000 in profit. This was all posted in real time with daily updates, and that forum doesn’t let you edit old posts so I couldn’t change anything if I wanted.
Good thing I didn’t listen to those people who told me I was doing it wrong.
Patience – I know that there are some times when I won’t have any trades. Sometimes the market just slowly trends upward over time and I don’t make very much money. I don’t care. Focus on the big picture.
Money management – I never use margin. I plan entries and exits ahead of time. I know how to hedge the other side. I never use margin. Also, I never use margin.
Knowing what I don’t know – I cannot predict price. I’ve studied every indicator, I’ve reverse engineered some of the popular ones, I’ve created my own. All useless. I’ve studied price action. I’ve studied volume analysis. I am still studying these things in my spare time but currently am still unable to predict direction, but maybe one day I will.
But until that time, I’ll continue to trade the way I do, having no idea where price is going tomorrow, only knowing that it’s going to go up and down.