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LEARN FROM GENERALS OF THE MARKETS – PART 20
“…And then people make the mistake of not working hard enough to keep improving.” – Stephen Temes
Since 1998, Adrian Manz (PhD) has been a great market speculator, writer and speaker at trading conferences. He’s a co-founder of TraderInsight.com. He’s been earning his own livelihood for many years, having traded the stock markets since 1988 (making over four per cent every month). His trading methodology employs the use statistics, chart analyses, and economic issues when making trading decisions. His trading methodology has been used perseveringly and prosperously in the unpredictable financial markets. He wrote 2 books titled: Around the Horn: A Trader’s Guide To Consistently Scoring In The Markets” and “Trade Secrets: Powerful Strategies For Volatile Markets.” Dr. Adrian was interviewed in TRADERS’ in October 2012 edition (www.tradersonline-mag.com). The quote at the end of this article was taken from that interview.
Lessons
We can learn many lessons from Dr. Adrian Manz ‘s career:
1. Dr. Adrian previously had another type of career, but was also busy studying the markets. With the support of his loving wife, they came up with some sound trading ideas that they worked upon and tested until the methodology became sensible and reliable in the markets. They practiced and practiced a lot. That’s what has brought them financial freedom. Do you have a day job? If yes, that’s great. But you’d also do well to give some consideration to trading. Think about the future, when no-one would need your services because of old age. Many professional traders were formerly doctors, engineers, lawyers, athletes, etc.
2. A good trading strategy must be applied with disciplined before you can get favorable results. That one doesn’t mean that you strategy must be complicated. If a good strategy is applied to trading without discipline, the result would be negative. So a good strategy + discipline = profits.
3. Can you find a good trading system that can give you a good statistical edge? Have you found one? I don’t mean a strategy that will make you 50% per month, but the one that would give you consistence results per month (though little). Dr. Adrian hasn’t had one negative month in about 100 months, although the monthly result is below 5% on average. Can you see that there are successful traders that achieve decent results? Please try to be like one of them.
4. The fact that a strategy is good doesn’t mean that it can’t bring losses. What matters most is how the losses can be managed effectively so that you still come out ahead in the long run. Once a position is opened, the rest of the thing is managerial. How do you manage you open trades? Do you use break even stops? Do you use judicious risk-to-reward ratio? Even a losing position can be managed properly. Whenever a position goes negative by a predetermined amount of percentage, Dr. Adrian would cut it, even if it hasn’t reached the stop.
5. Most often, many people have too high expectations from the markets. Thinking that you need to win at least, 9 out of your 10 trades, is unrealistic. Unless you use a negative expectancy system (whose average losses would be greater than average profits ultimately), in which you risk $500 to win $5 on each trade. The idea behind this is to hit a profit quickly, while a negative position is given enough chance to come back to breakeven or positivity. Many people like this kind of trading mindset. But, do you think it is rational? Because of the constant uncertainty in the markets, many people think trading is difficult. Yes, it’s difficult, and that is a fact we should always remember. As a result of this, you need a trading methodology that fits you and agrees with your rational psychology.
6. You shouldn’t measure your progress by how much you win or lose, since that isn’t a good way of doing that. Focus on trading your ideas faithfully – sticking to your rules staunchly. Based on your preferred timeframe, you might want to check your trading results once every month, every quarter, every six-month period or every year; not every day.
Conclusion: Experimenting with a trading methodology with different parameters would give you a bird’s eye view idea of the reliability of such methodology. However, this doesn’t necessarily signify it as a methodology that would surely bring positive expectancy in live market conditions. An astute speculator would simply remain loyal to the methodology, and it’s an area in which correct psychology is mandatory.
The article is ended with a quote from Dr. Adrian:
“I have been proven to achieve good returns, so I stick to that method. Many traders want to keep using such a setup on a long term basis, but in the end fail to stick to it… It is only from live trading that you can learn and then improve your performance. My confidence is based on my extensive trading statistics showing that my method and different setups work when you stick to them consistently.”
