Wednesday, May 11, 2016

Only a fool accepts widely held trading maxims

Trading maxims that are treated as gospel, but nobody actually investigates their accuracy.

Why do we implement them into our trading plans without investigating? 

It is because we are sheep, and it's easier to be a follower.

Successful traders think like wolves and never follow the herd. In fact, they avoid the herd like it's the plague.

Last summer I realized I had spent my entire trading career as a sheep in wolves clothing when it came to risk management.

For years I had steadfastly held on to the belief that you must get 2:1 on every single trade. After getting stopped out of a number of trades that initially went my way I decided to investigate the 2:1 mantra.

My research was enlightening and totally changed my attitude towards risk management and probability trading. It showed that had I taken on 1.3:1 risk instead of 2:1in rangebound markets, I would have increased my profits and win rate.

I am no longer mislead by this false risk management "truth".

Let this be an important lesson. Never accept strategies that the herd adopts and investigate everything, no matter how nice it sounds.


If you would like to learn more about how I trade, receive my nightly focus list with market analysis, setups and trade alerts, sign up at BullsonWallStreet.com

3 comments:

Joseph Fiore said...

Paul, by taking on 1.3:1 risk do you mean tightening stops? Thanks.

Alex B said...

Cheers Paul! Thanks for keeping it real

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