Profitable Trading is a Process

BarroMetrics Views: Profitable Trading is a Process

I was having a chat with a close friend last night. We were discussing why it is so few aspiring traders succeed. Now, I am not talking about those who jump from one ‘get rich quick’ scheme to another ‘get rich’ promise. Instead, I am speaking about those who genuinely invest in their education, and who, on the face of it, are committed to doing what it takes to attain their desired outcome.

We concluded that it boiled down to an unwillingness to leave the safety of their comfort zone. This meant that they would lack the experiential foundation to trust the new process.

Let me give you an example.

A friend of mine is smart and has a great feel for the market. We analysed his trades and found that his day-trades were unprofitable whereas the 5-day timeframe provided his greatest return on capital. He said was committed to doing whatever he needed to do to maximize his return. To prove it, he:

  • redid his trading plan and 
  • redid risk management rules. 

A great deal of work and all good. But, when he went to trade, the first ten trades were either day trades or were trades that failed to last beyond 2 days. For each of the ten trades, he had a ‘good reason’ for entering and/or exiting the trade within the shorter timeframe – he said that next time, he would extend his timeframe.

Sounds like my sister’s ‘tomorrow diet’ – “I know I need to diet, tomorrow I’ll start; today I’ll gorge”.Hmm. As Dr George Lianos once told me: “If you see a pattern of behaviour leading to certain results, focus on the pattern and forget about the reasons for the individual instances”.

Add to this human propensity (of wanting to stay within our comfort zone), the fact that on a trade- by-trade basis, a trade’s outcome is uncertain i.e. we can everything ‘right’ and still lose money, we have an environment that encourages existing behaviour. But, not changing losing behaviour means we never adopt winning ones.

So, how did the  successful traders become successful? They acted contrary to their automatic responses – they took baby steps, changed what was not working; they adopted what might work.

Once they knew what did work, they took actions that turned the behaviour into habits, and so turned the new behaviour into habits of success.

4 thoughts on “Profitable Trading is a Process”

  1. 1.
    ” … those who genuinely invest in their education, and who, on the face of it, are committed to doing what it takes to attain their desired outcome…”

    Those who succeed, choose or happen to have the RIGHT education from REALLY SUCCESSFUL traders
    ~ just like 3 times holder of Robbins World Cup Championship of Futures Trading, Andrea Unger, learned from the high-profile and successful italian trader Domenico Foti!

    Blessed are those who are wise to choose and given the privilege to have the right education given by the right person!

    2.
    ” … unwillingness to leave the safety of their comfort zone …”

    a. Those who are successful by entering the trades at the Zones, are unwilling to leave the safety of their comfort zones (at the Zones) to enter a trade.

    b. I guess, generally, Americans are more willing to leave the safety of their comfort zones.

    Are they more successful in their trading compared to other nationalities?

  2. Hi Paul

    Thanks for the comments.

    Only part I disagree with is “generally, Americans are more willing to leave the safety of their comfort zones”.

    I have found no evidence of that. And, in general, American success stats are as dismal as anywhere else in the world.

  3. Great post Ray. I follow your blog closely and derive great value from it.

    You nailed it on the reasons, many people trade out of boredom or whatever despite best intentions, and thus give back profits or experience severe drawdowns.

    I found the same in my trading earlier, so I instead invested time in building and testing systems, and trade those alone. Has worked out much better. The moment my discretion comes in, I make mistakes 🙂

  4. Hi Vikas

    You sound like someone who has found a method that suits his personality. That’s great! Every success!

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