A Thin Line

BarroMetrics Views:  A Thin Line

The thin line between trading success and failure was recently driven home.

End June this year, we completed the first Ultimate course. I view Ultimate as my best course to date. I had a new format (Flip the Classroom) which I believed would make a difference to the learning. So what happened?

Fourteen weeks of intense study provided the attendees with a solid foundation for understanding the nature of markets and themselves; more important it taught them to apply that knowledge to attain their trading goals.  For most, at the end of the course had a trading plan, and templates for the application of their money management rules and psych process.  (For others, shortly after the end). From the perspective of achieving my goals, all looked rosy for their future.

Then……..

The other month or so, I spoke with a number of them – I wanted a handle on how the group was doing:

  • Some were doing great! 
  • Others were experiencing a drawdown but were psychologically in good space (i.e. they accepted that drawdowns were inevitable in this game and their positive expectancy was intact).
  • While still others were struggling and wondering where the success they expected had gone. They had worked hard but had little to show for their work.

Think about this: same course, same teacher, every graduate had worked hard to learn to the theory, incorporate theory into a set of trading rules, and then worked hard to consistently implement their rules. And yet, the results varied widely – especially among those who had done well and those who had little to show for their efforts.

I looked to find a solution.

  • Different instruments? That was my first thought. True most were trading FX. But two were trading stock indices, and their results were at either end of the spectrum.
  • Timeframe? Nope, most were end of day traders.
  • Consistency of execution? There were some differences but not enough to account for the results.

In fact in some cases, exactly the same timeframe, instrument, the same pattern, and execution brought about very different results of success and failure.

I found the discrepancy fascinating. Eventually I found two reasons that seem to explain most of the cases…..more later this week.

By the way, you may like to comment on this question: what is the single most important difference that has distinguished between your successes and failures?

14 thoughts on “A Thin Line”

  1. Hi Ray, this is fascinating, i look forward to your answer. You mention,instrument,timeframe, same pattern and execution so my guess is the exit or a journal/s curve. My comment on the most important difference in my trading ,possibly would be developing patience for the trade to run its course and setting clear exit parameters if its a losing trade. plus our beloved Expectancy Formula! cheers Baz

  2. Different results because of
    1. Discretionary or rules-based trading system?
    2. Different markets/instruments?
    3. For Forex, end-of-day: 5 pm EST? The daily bar chart ends at EST 5 pm?
    4. Using different brokers – different spreads, different slippages, different prices at any given time?
    5. Stop/market orders or limit orders?

  3. Patience and clear thought pricess (that I guess comes with patience) to assert if a setup is valid or not.
    Because I tend to overtrade.

  4. Hi Paul

    Thanks for taking out to drop me a line.

    The rules are a discretionary-rule based system. In this case some of the trades were the same patterns of the same instrument. So, the answer for the difference lay elsewhere.

    I think you will find the answer enlightening.

  5. hi Ray,
    Discretionary-rule based system will definitely result in different views and actions for different traders.

    His mood, state of mind, physical condition etc. will influence his market view, his bias …

    ___

    Different trading results because of what are under the control of the trader:
    1. Number of different trades made per day/week
    2. Time lag of execution of valid trade
    3. Position sizing methods

    ___

    In August, during a forum, I asked 4-Times World Futures & Forex Trading Champion Andra Ungur what are the most important factors for a very successful trader
    1. entry?
    2. profit target?
    3. stop loss?
    4. position sizing?

    He said profit target is the least important.

    Stop loss and position sizing are most important
    – for a very successful trader (haha, like him)!

    Last week, he told me that he used Fixed Ratio position sizing method for his money management.

    (Of course, I asked him how he determine the Delta size.)

  6. Last week, Andra Ungur told us that he did Portfoilio Trading.

    He used many trading strategies concurrently. Each strategy may not be the best by itself, but how each one of them combines together as a Portfolio to give the best result.

    For Ultimate course graduates, which currency pairs are included in the Portfolio, will result in great different trading results.

    Are the pairs highly co-related?

  7. Hi Paul

    Remember we are talking about a methodology that seeks to understand the principles governing the nature of markets.

    Remember too we are speaking about not a difference in positive expectancy but massive difference in positive and negative expectancy.

    So, on a trade=by-trade basis or small sample size of results, I’d agree with you – we may see positive and negative expectancies.

    But, in this case, we should not have seen the disparity of results that was evident among some of the students – something else was in play.

  8. hi Ray,
    For Ultimate course graduates,

    “we should not have seen the disparity of results that was evident among some of the students”

    because of mental and emotional issues as discussed by Brett Steenbarger in his books and blogs, right? 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *