Big Mike's Trading Blog

Day trading futures, discussing money management and trade management techniques, and more

Focus on beating other traders

Let's talk about focus, energy, discipline, experience, humility, financial security, and motivation.

Today I've started reading a new book, "Evidence Based Technical Analysis" by David Aronson.

I really like what I am seeing so far. The author tests over 6,000 indicator combinations with the purpose of determining if any of them have predictive qualities. He uses 30 years of market data. The result is that none of them do. But that isn't spoiling the book, the book itself is the journey and testing methodologies themselves and that is what I find fascinating.

One thing occurred to me as I was reading the early chapters of this book. I've been preaching about how psychology and money management are what control your profitability, and how indicators are not the answer.

Perhaps I need to reshape that a bit and apply more focus to this: your goal as a trader is to beat other traders. Nothing more, nothing less.

Really, truly, that is what it comes down to. In order for you to "win" trading, someone else has to lose. When an indicator tells you to take a position, or you look for market bias and trends, gap plays, breakouts, etc -- all of these things are inconsequential in the big picture. You may analyze, as David did, 30 years of historical data and find that one particular occurrence or setup happens during the current conditions and play that setup as an edge, but at the end of the day your balance sheet will reflect whether or not you beat other traders, or if they beat you.

Everyone has heard "buy low, sell high" or if that doesn't work "buy high, sell higher". Everyone has heard "cut your losers, let your winners run". I really think you could delete everything except these two statements, remove all indicators and methods, and just by following this advice you have the tools to be a successful trader. In order to beat the pack, all you need to do is make better decisions than the majority of the other players on the field.

"Is that all? Gee so simple!", I hear you saying... I didn't say it was easy, but it is simple.

The point I am trying to make is that in order to trade better than the rest you have to make smarter decisions than the rest. And I don't think those decisions are benefited by any value an indicator, oscillator, gap play or method. The decisions are all within you. You have to be at the top of your game in terms of focus, energy, discipline, experience, humility, financial security, and motivation. In each of these areas you must outperform or best your fellow traders.

The countless hours (hundreds or thousands of hours) that people spend on indicators would be better spent on practicing or bolstering your focus, energy, discipline, experience, humility, financial security and motivation. For example, if each day you are spending 4 hours a day on backtesting and you do it six days a week, perhaps you could take those six days focus on one of the above items instead, rotating them in and out on a daily basis.

It may sound odd, but I think the time is well spent.



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