Trading Lessons I Learned the Hard Way, Part 18

08/24/2012 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 finding your “niche” in trading. The most successful traders, including the professionals, do just a few things really well and repeat those actions to achieve a high degree of success. It was great to find my “niche,” but I still had other major obstacles to overcome.

Controlling my actions and being tempted to trade was one of the most difficult obstacles for me to overcome. When I first started trading about 15 years ago, I only traded part time, and by that limitation I couldn’t just jump in and out of trades all day. Although I lost money trading until I did educate myself, once I found my “niche,” the limited time I had to trade actually worked to my benefit.

I didn’t know this at the time, but realized it once I became a full-time trader. My personal trading plan originally did not allow me to take any trades for the first 30 minutes after the market opened, I traded all day after that. Some days, I would do 30, 40 or even 50 trades with fairly substantial volume. I rarely had a losing trading day, but it was sometimes difficult to maintain a specialized, laser-like focus for that many hours.

My mindset at the time came from my Type A personality and my experience managing other businesses. I felt I had to trade all day and put in the seat time. After all, I did well in my past endeavors by putting in whatever hours and intensity needed to be successful.

I learned pretty quickly that it wasn’t about the number of hours I traded or number of trades I took that was important, but rather the quality of the trades I took and when. I wasn’t aware at first that the market only moved a finite average amount each day based on support / resistance areas. Nor did I realize that when trading intraday, the market only put in a specific number of quality pivot moves per day.

This was a huge reckoning for me to come to terms with. After all, most of us come from backgrounds where the more we work, the more we should make.

This business of trading was so very different than that mindset. In fact the opposite is mostly true. Often the less I work, in the right way, the more I can make. This is based on one’s capital account size and risk allowances.

Once I grasped this, my trading changed markedly. It didn’t take me long to start reducing my trading time. After about a six-month period, I became really good at trading the opening 30 minutes, so that became part of my trading plan. Then I gradually started to reduce the number of hours I traded per day.

This was really hard for me, because I felt if I left my seat I would miss something. I felt I had to be watching the market, as though the market was my time clock. I didn’t get into trading for another “ball and chain,” but nevertheless, it was really hard for me to break out of years of influence from past business experiences.

I finally came to the conclusion that even if I watched or traded the market every minute it was open, I had no control over what it did. The controlling nature that I had would not work in trading. What I could control was how long I wanted to trade in a productive way.

I went on a mission to learn pivot points, and how to recognize where and when the best trading opportunities presented themselves. I perfected this over a relatively short period of time, and in the process eventually moved down to trading only four hours per day, then three, and now am mostly finished with my short-term trades within the first 45 to 90 minutes after the market opens.

Unfortunately, I am limited on the length of each article, so I will stop here. I have more to share with you on this subject at a later time. Stay tuned for the next part of this journey..

Lessons learned:

  1. Don’t trade just because you think you have to!
  2. Trade only at times when you can maintain your focus!
  3. Only take your trades when the market supports that decision!
  4. It’s not about how many trades we take, but rather which trades we take and when during each market day!
  5. The market will do whatever it’s going to do no matter if we are at our trading station or not!

Next, I will continue where I left off on mindsets.

Ron Wagner can be found at Revolutionary Trading.
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