Trading Lessons I Learned the Hard Way, Part 24

09/04/2012 8:00 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 time, I talked about "crutches,” and that is a nice transition to the subject of this edition.

I hate to admit it, but when I started trading, Angel and I did purchase a green light/red light program. I remember the hotel, and the back-room sales approach, making the program seem so irresistible that even our grandmothers could make it work, they said. Those words still echo in my mind.

Many things have changed over the last decade, but the number of programs that continue to be offered to traders and investors, and the manner in which they are offered, has not. The offers to go from rags to riches will exist as long as we are alive, and new products and services for everything, including trading and investing, will always be made available.

I am surely not going to say that all such products and services are bad or fads. I learned the hard way, after spending thousands of dollars on various so-called “new ideas,” that those products and services are put on the shelf for us to buy as just another potential opportunity. Some may benefit from them and many will not. We have all bought things we really liked once we got them home, and other things we wished we would have never touched.

I want to discuss a few points about all this. First of all, we have far more financial instruments to trade today than ever before. Many years ago, mutual funds were new and "hot," and were the only real good choices we had. Over the years, we have seen hundreds of new routes become available to invest or trade from our own locations, by computer.

E-mini futures contracts, inverse ETFs, QQQs, and many other vehicles that we can trade today did not exist 15 to 20 years ago. Exchanges have changed the way they allow us to trade, and how they provide margin availability.

I remember when I started we had only 1 choice. Two times margin was all I started with. After the dot.com bubble correction in 2001, they changed the rules to give anyone who still had money available four times margin if you opened a PDT account.

Imagine how anemic the total daily trading volume may have been if they had not done that. Even today, if they took away the four times margin—or in some cases 10:1 or even 20:1—how would that affect the liquidity in the markets?

My point is that we have to realize that, although some products and services can help us, we must be objective in our choices and not get trapped into emotional decisions. We must avoid what I call “mental gymnastics” and the unrealistically hopeful predictions of how great something may be.

A lot of great products, programs, and services do exist, with some great people providing great support to help others improve in many ways. What I have found is that it is often not a program failure, but rather the program operator, meaning us.

Over the past 13 years, I have had countless programmers and individuals approach me with what they thought were fantastic ideas on how to improve what they did financially and help others. My answer to them was always the same: Come back to me after a year with some statistics of your personal success, using your great system, and we can talk. Not one has ever come back.

I have even worked with some of the best programmers that worked on systematic approaches to making it easier to trade. Although some progress has been made in various areas, nothing can do more or better than what we can do ourselves with little effort and time invested.

Next: Using various forms of so-called black boxes

|pagebreak|

I have used various forms of the so-called “black boxes” and have never found them to be useful or consistent or do more than I can achieve in my own method of trading. Let me explain this further.

Most individuals, including myself, feel that trading needs to be very active. Many were very successful in previous careers, and did not become that way without hard work. Trading, however, is different. It’s not about how many alerts or trades we take, but more about taking the right trade at the right time. I have found that nothing can or will replace the most important aspects of trading well, which are patience and discipline.

I have trained a great many traders over the past 13 years, and although it takes some time to master the details and technical aspects of trading, it is always the patience and discipline that will make or break a trader, even those using black box or systematic programs.

Everyone would like easy, and I tried to find that too. What I found out was that once we can identify the skill sets needed to do something well, we just have to perfect those one at a time until mastered. After that, “easy” will come, and things can be done in a very systematic approach.

Lessons learned:

  1. It’s ok to “shop around” to see what new technology or programs exist and how they might fit into our plans, but at some point we have to draw a line in the sand and realize we are responsible for making something work for ourselves!

  2. We need to realize it’s rarely the program that doesn’t work, if it’s a reliable program, but rather the “program operator” who has to take responsibility to produce success!

  3. Stop looking around and see it through. Choose a program and type of trading that suits your personality and can help you reach your objectives and then stick with it. Don’t give up!

  4. Protect your capital during your investigative process. Don’t just jump in and take the risk of drowning!

  5. Master just a few things, do them well and repeat. It’s not about being more active, but rather taking the right trades at the right time!

My Journey is nearly complete. Next, I will tell you how we constructed our program.

Ron Wagner can be found at Revolutionary Trading.

Related Articles on STRATEGIES