Matthew Kerkhoff, options expert and editor of Dow Theory Letters, continues his 14-part educational...
Can Trading Be Boiled Down to Just These 2 Things?
12/29/2016 12:32 pm EST
Though he thinks trading systems, price action, and technical analysis are helpful tools for the trader to have at his disposal, Ryan Mallory of SharePlanner.com doesn't think they are at the root of success; instead, he feels the ability to trade successfully really comes down to these two key traits.
I see so many self-proclaimed trading philosophers on Twitter (TWTR) constantly spouting off fancy trading quotes and cliches. Here's one I saw on Twitter this week:
"What separates successful technicians from not so successful? No matter the chart style, it comes down to the analysis of price action."
Touches the soul.
It is just not true.
You got others out there that will say,
"Buy low, sell high."
"Buy the rumor, sell the news."
"Sell in May, Go Away."
Blah, blah, blah!
If you really want to know the two things that successful trading boils down to, it isn't smarts, it isn't trading systems, it isn't price action, or technical analysis. Those are all helpful tools to have at your disposal, but they have nothing to do with what is at the root of success.
What is at the root of success is the ability to manage
risk and to manage yourself. If you don't do both of these things, nothing
else will ever matter. So when someone says it all comes down to "price action,"
he apparently has never examined himself as a trader beyond the ability to look
at a chart.
I use charts every day, I scan hundreds-if not thousands-of them every single day. And yet the ability to trade successfully doesn't come down to how many alerts go off on my trading platform or how many good set-ups I can find.
No. Far from it, it comes down to the ability to manage the risk on each and every trade. To follow the steps that I have put in place to keep price action from getting out of control, and in the process, to control myself from not violating my risk principals, to not trade out of frustration and boredom, or to take on a trade where I cannot define the risk.
By Ryan Mallory, Founder, SharePlanner.com
Related Articles on STRATEGIES
Profit from a market by capturing a trend. Money management is key. The battle is often from within,...
Has Mr. Market (S&P 500/Equities) priced into too much positivity, while inflation remains at ba...
Berkshire Hathaway (BRK.B) is well known as the huge operating and investment company that was built...