• In order to perfect one setup you need to find it first
  • Discovery is an organic process
  • Refinement requires focus on one instrument
  • Speculation is observation and execution put together

In order to perfect one setup you need to find it first

I had a good trading week on my own account, increasing by 8% which was far above my 2% target. (Don’t get too excited. I am trading a small capital base with intent on trying to double it over a year and full understanding that I may blow it up. If you want to get a more realistic understanding of my returns divide them by 10)

In any case I did 13 trades this week and hit a 76% win rate. For a guy who regularly used to do 13 trades an hour rather than a week, this came as a shock and made me realize just how far I’ve come in my trading journey on this particular strategy. 

Bruce Lee once said that he feared not the man who has practiced 10,000 kicks once, but the man who has practiced one kick 10,000 times. This is one of my favorite quotes because it shows the importance of practiced learning in life and certainly in trading. But the quote neglects to mention that in order to settle on one kick that we must practice thousands of times we must first explore a thousand other kicks that we will eventually discard as inferior.

Discovery is an organic process

The process of discovery which is messy, chaotic, psychologically destabilizing and almost always highly frustrating is the precondition for excellence. There is no Platonic ideal from which to start. There is only a vast unknown which we must explore continuously  before we can navigate it with any degree of skill. Simply put you’ve got to make a lot of bad trades in order to figure  out the good ones. 

The process is by no means linear. And it certainly wasn’t with this set up. I spent months discovering and working on the best method for trade entry. Then more months on choosing the right trading style and finally only now have I come up with what I think is an intelligent structure for trade analysis. In short if you believe that all proper trades setups must come from some a priori thesis that is then tested against real market prices, I did everything back-ass backwards. But that’s precisely why my strategy is working. The endless organic tinkering and experimentation  helped me to isolate some key behavioral characteristics of price that I could then put together into an intelligent structure.

Refinement requires focus on one instrument

Now that the strategy appears to be working you would think I would instantly use it on every market instrument possible. No. Bruce Lee was right. Once you settle on a kick you need to practice that kick endlessly to become intimately familiar with all of its nuances before you can move to the next step. So I intend to trade this idea over and over and over again only on the NQ (which is my instrument of choice) before I try it on FX or commodities.

I can’t tell you how psychologically grounding it is to focus on just one idea. It’s like living with someone under the same roof for a long time. You learn their behavioral ticks so well that you can tell if they are happy or sad or annoyed just by the tone of their voice. A trading set-up can be very similar. If you watch the market action of your setup long enough you can begin to sense the moves ahead of time. I often play a game during the trading day where I “virtually” take a position in my head and check to see if I am right a few minutes later. The longer I trade my setup the better I am getting at the game.

Speculation is observation and execution put together

In martial arts as in the market success depends on two distinct but complementary skill sets. The observation of your opponent and your ability to strike at the right time. Speculation is simply observation and execution put together, and as Bruce Lee taught us practicing one helps us to refine the other.