I recently received an email from a YTC reader with an incredibly important insight into trading success.
Here's an extract from the email:
I heard this recently while watching football.
It's not how many great plays you make, it's how few bad plays you make.
I immediately emailed this to myself because it is so applicable to trading. I know where the good places are to trade, but the key is waiting for price to get there and not "forcing" a trade.
It also ties in well to your Facebook posts last week and the latest blog article.
Here is the full quote I found online:
"Like I always say, it's not how many great plays you make; it's how few bad ones you make. I know fans, and even some losing coaches, are enamored with long pass completions or the great run plays, but that doesn't offset the interception or the fumble."… Jimmy Johnson
I love it!
This is absolutely 100% applicable to trading.
It's the counter-intuitive path to trading success.
Reduce the number of bad trades.
How do we do that?
1. We limit our trading to our best setups only.
Get absolutely clear on what an A+ trading opportunity should look like. And then cut out anything that doesn't meet these strict requirements.
Define the context. Where will these trades be found within the wider market structure? Now limit trading ONLY to those places on the chart.
How should price be moving (speed, volatility, smoothness)? Define your ideal conditions and put in place controls to ensure you trade ONLY when those conditions are in play.
2. We have a predetermined plan for execution.
Now that we're limited to trading only within an ideal context (market structure and price conditions), you need to be completely clear on how you execute and manage your trade opportunity.
Consistency in execution requires standard default plans with regards to sizing, entry triggers, stop and target locations. Plus any additional techniques which might be relevant to your style of trading, such as when you will scale in or out, or under what conditions you will re-enter if stopped out. Your decisions may involve some discretion. That's fine. But this discretion should be built into your standard management plan.
You need to know what to do… and when to do it. No hesitation.
3. We monitor our performance to identify and reduce errors.
Track everything! If you make an error or poor decision, record it.
Look to your longer term stats during your weekly or monthly reviews. If you find something repeating over time, then that is cause for celebration. You have found a way to improve your edge. Find a way to cut out the error, or at least reduce the likelihood or frequency of occurrence.
Image: Error tracking via the Trading Journal Spreadsheet!
It's not how many great plays you make, it's how few bad plays you make.
Along the same lines, but for those who are not into sport and perhaps relate more to art, I saw this quote recently which I quite liked:
"The sculpture is already complete within the marble block, before I start my work. It is already there, I just have to chisel away the superfluous material."… Michaelangelo
Trading success is already there.
It's just hidden beneath all the errors and poor decisions. We just need to chisel away at them, getting rid of the bad trades and poor decisions, and allow the underlying success to reveal itself.
PS. See here also for the same theme – https://yourtradingcoach.com/trading-business/are-you-closer-to-profitability-than-you-thought/
Great article and quote. At the end of the day, people fall for not being disciplined. They aren’t able to take notes and trade A+ setups. They want to win, but they don’t want to do the dirty work. Another quote that I like:
“You will show your poker greatness by the hands you fold, not the hands you play”. -Dan Reed.
I love it. Insights from sport, art and poker all pointing us toward the same concepts for excellence in performance. This is awesome.
And yes, I agree entirely. Everyone wants the reward. So few are willing to do the work. But in the end, I truly believe that everyone does get what they want out of trading.
I just want to let you know that your blog is fantastic. If i was the exaggerating kind i would say you are my god. I’ll avoid exaggerating and just tell you that you are an inspiration for me in a way very few other traders/mentors have been for the last three years of my life. You dont hide the concepts behind curtains, you are clear about what you know and you tell it to us in very clear words. Im thankful to you, please continue your good work.
Thanks J, Very kind. And much appreciated. But I’m just someone who’s perhaps a little further along the journey, sharing a little of what I’ve found.
I’m glad you’ve found my writing useful.
All the best,
Thanks for a great article. I find it very sound advice and “try” to only take the A+ setups. This quote is not mine, but follows the same logic and I try to read it daily before the open.
“If we were to cut the types of trades that we take by two-thirds and focus solely on the one or two that reflect our greatest edge in the markets and our greatest trading strength – and if we were to meaningfully increase the size/risk taken for each of those trades – our overall profitability and risk-adjusted returns would rise significantly.”
Thanks again, always look forward to your posts.
Great quote. Thanks for sharing Trip. 🙂
the quote you mention is from Brett Steenbarger and here’s the blog post it appeared in.
I’m reading this blog later than I’d like, but I wanted to add my 2c: one trend I can clearly notice, looking back to my own trading, is the drastic change in the % of time I spend during my day actively in a position, and related to that, how many trades I average per session.
Everyone is different, but individual trend is probably consistent across most traders: for me when I started, during a typical session I was roughly 50% of the time in an open position with an average of 15-20 trades/session. After having to reload my account a couple times, I made adjustments and ended up averaging less and less time in active positions, and more time on the sidelines. I can’t quote precise numbers on the intermediate stages of this, because I never really noticed this trend until I read this blog.
Nowadays, I withdraw $ from my account periodically, instead of the other way around! 🙂 And I average about 3 or 4 trades in a session, no more than that, with maybe 10% of the time spent in active positions.
The rest of my session time is spent monitoring the market and spotting patterns. It’s striking how much clearer things become, when pressure to be active at all costs is removed!
Note that reducing the number of trades made per day was never a goal for me – it’s rather a side effect that emerged as I made adjustments to my technique, learning when to wait on the sidelines for the perfect opportunity!
Thanks Michael. Great comment.
That seems to be a common finding in my experience. The more a trader develops the more they discover that “Less is More”. In my own case, I’ve found this occurring in a slightly different way. If you look at a chart of a complete session, it used to be that I would try (and feel the need to) trade EVERY price swing, if that was at all possible. Regardless of environment and current conditions, I couldn’t miss out and had to be in there somehow. Of course, the result of trading through poor or difficult conditions is not only draining on the account, but also exhausting. Now I’m quite happy to stand aside and avoid anything I perceive as poor conditions, saving my energy and focus for those times when conditions are more suited to smooth, directional price action. Less is more!