Trading Lessons I Learned the Hard Way, Part 17

08/23/2012 6:30 am EST


Ron Wagner

Principal Partner,

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 time, I talked about tracking my trades and how valuable that was in order to make little adjustments routinely for my improvement. This worked great, but I still had more to accomplish.

During the first couple of years that I traded on the smaller time frame charts for income, I traded all day, every day. After studying the market each day, I realized that there were certain times of the day that were the most lucrative to trade for smaller, reliable gains.

After tracking my results for many months, I found that most of my profits were realized at very specific times of the day. I studied this for a long time, and continually shortened the amount of time I traded each day.

Over time, I eventually ended up on most days only trading 60 to 90 minutes. That did not include adjustments to my longer-term holds, or swing trades, which only take minutes per day to do.

Like most traders, I thought that we could just turn on our computer and certainly great trades would be available at any time the market was open. After all, with over 5,000 stocks and considering the best of those as candidates for trading, how could I not find something to trade?

I found that, on most days, the trading range was fairly exhausted after certain moves of the market. In addition, I noticed how far most stocks move at certain times, which rapidly improved my trading. It became so obvious to me that it was not about trading more, but rather about trading less—at the right time.

As I began to establish my preferred win-loss ratio, which is very high, I realized this was an incredible method to make money. Let me explain. It was not a matter of taking more trades or having to sit in front of my computer every minute the market was open, but rather to have the confidence to increase my share size on the trades that had the highest probability of success and the most range for profitability.

This important revelation, more than a decade ago, changed how I looked at the market. No longer was I held hostage to taking less than desirable trades, or trading during times in the market when it was not as lucrative. I trained myself to be extremely focused during a short period of time, and to take advantage of market moves in alignment with my trades. This made an incredible difference in my trading.

I realized that the adage “Success always comes when preparation meets opportunity” was so true. I found that the amount of time I was in a trade was so little in comparison to the amount of time I needed to prepare for each trade.

I like the carpenter’s motto: “Measure twice and cut once”! Now I go through a mental check list for each trade before I get in it to make sure it has all the qualities that I am looking for.

I’m certainly not suggesting that everyone should trade exactly as I do, or for the same length of time I prefer, but I would strongly encourage everyone to track their results and find out what they do well. Once evaluated, it becomes easier to identify what to work on perfecting. I found my niche in trading and have never looked back.

Lessons learned:

  1. Focus on a time of day that you prefer to trade, but also one that you are good at!
  2. Don’t think it’s necessary to trade all day or take more trades to produce great results!
  3. Prepare more, trade less, and find a good balance for your trading!
  4. Learn to identify when you have the highest probability of a successful trade based on the amount of range available in the trade and in the market environment!
  5. Always monitor your personal statistics so you can make small adjustments along the way!
  6. Work on improving one element at a time to improve your trading!
  7. Make each trade count and find your “niche” in the market!

Next, I will talk about some adjustments I had to make to my thinking which made a big difference in my attitude about trading.

Ron Wagner can be found at Revolutionary Trading.
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