Trading Lessons I Learned the Hard Way, Part 6

08/08/2012 9:00 am EST

Focus: STRATEGIES

Ron Wagner

Principal Partner, RevolutionaryTrading.com

Ron Wagner of Revolutionary Trading discusses the lessons he learned from his early days of trading, and how his trading has evolved to become profitable.

Find the previous article here. Start at the beginning here.

Last article, I talked about how I got very good at scanning and finding trading candidates. For my daytrading, I could find something within a very short time on any day, at any time, to consider trading. Finding good candidates to trade from the scanning I did after the market closed became a daily routine. I incorporated both techniques into my trading plan.

Last edition, I said that I would tell you why I started trading less as I got better at scanning. Actually there were two reasons. At first it was because I was overwhelmed with such a wide selection, and I got confused.

Then I got scared! I became afraid of losing money from my own choices. It was far easier to blame someone else than to take responsibility for my own choices.

I had to figure out how to correct this. What I had to do was track all of my choices for several months to convince myself statistically that I was in fact on the right track. Once I did this, it was fantastic! I started taking small shares at first, and eventually built up the confidence to increase share size as I gained more and more confidence.

For most of my trading career, I have had a very high win-loss ratio and that is important to me. Not everyone has to have a high win-loss ratio, but for me, I needed to know I was trading well. Anyone can have a lucky winner or a bad loser. I wanted to be consistent.

In order to accomplish this, I had to actually force myself to take at least X trades per day/week. I know this sounds counterproductive, as we should only trade when everything is in place. But I was still developing my trading plan and didn’t know any better, so I forced myself to trade. It sounds a little funny as I’m typing this, but that is in fact what I had to do.

Through this self-enforced discipline, I did very well. Eventually, I ended up trading too much, and had to put a top limit on how many trades I could take, to make sure I only took the best ones. I eventually found a good compromise and have not changed my style of trading now for about ten years.

Once you find something that works, you don’t want to change it much if at all. Small adjustments are fine, but once you are routinely profitable, it becomes easier and easier to increase the total gains. I will discuss that in a future edition.

Now, I have found a style of trading I enjoy, that I'm good at, and a way to find great candidates. I still had a ways to go. Organization and what to scan for were still on my “to do” list.

Lessons learned:

  1. Don’t think you have to trade all day or take trades just to be busy!

  2. It’s not about trading more, but rather about trading at the right time with the appropriate share size that will make more money!

  3. Track your trades to convince yourself that you can make great decisions!

  4. Find a reasonable number of trades to take on an average day, week, or month that can help you reach your goals!

  5. Be objective in figuring out what you need to do in order to reach your goals!

Next issue, I will talk about a Trading Universe, watch lists and what one single thing that also improved my results incredibly.

Ron Wagner can be found at Revolutionary Trading.

Related Articles on STRATEGIES