Why Keep Trading As Simple As Possible

2012 is history. It was a decent year for me both personally and professionally.

Trading wise, I improved a lot compared to 2011 which was a disaster and kind of a wasted year. 2012 showed a really nice development in the second half. I managed to pull some solid days in my day trading. Remarkably, all this happened as I started writing this blog. Coincidence? I don’t think so. Putting things in writing helps me a lot and makes me disciplined and motivated. It takes some time to write, but well worth it!

This is my first post in 2013. I’m writing this post to motivate myself, as I guess this post has little value for someone else.

For 2013 I have one big goal for myself: to better execute my trades. I’m an introverted trader and much better at analyzing than trading.

News is noise – remove it

Too much data disables my decision-making. The less information I have, the better.

Hence, I don’t read the news. Knowledge is good, but in trading, I try to focus on just simple systems. Trading should be “easy”, somewhat dull, and done more or less automatically. I have good statistics of all my trades and it’s apparent where I can improve:

Hold winners, cut losers: time stops work

I tend to hold losers and cut winners. All my statistics tell me I’m much better off by simply exiting all my trades on a time stop. It does not matter when I exit as long as I’m doing it at the same time day after day.

The reason is simple: on good days I exit too early, and on bad days I exit later. On average there are about 2,4 days a month that really makes the difference if I hold longer. Some days I can make 4 times more on days by holding.

I remember Jesse Livermores quote from The Reminiscences of A Stock Operator on page 68:

It never was my thinking that made the big money for me. It always was my sitting.

My promise to myself for 2013 is that I’m going to trade my strategies absolutely according to my statistics. No second-guessing and no panicking (after all, it’s only money!) I will simply execute my orders and then go away from the computer. Do something else instead, go out and chop some wood, do the lawn, make a new terrace, do whatever, but don’t sit in front of the screen. All my order entry is automatic, so I can just leave them and go away.

Some further things I will do going into the new year:

1. Do at least 3 hours of testing ideas each day. I currently do this, but will designate a certain period of the day to do this.
2. Spend one hour reading other blogs/trading literature. This is extremely important. There are just two ways to get trading ideas: 1. To trade live and real money, and 2. To read blogs/magazines. I stay away from reading economic news. It’s just noise. The big picture is quite obvious, anyway.
3. Spend 2 hours writing blog/books.
4. Spend 1 hour on my real estate projects.
5. Read more about science and history.
6. Reduce my trading time. As written above, I’ll go away from the computer and do something else. This will free up at least 1 hour each day which is wasted.