It’s official… we’re now in a bear market. At Raging Bull we’ve been through this before. And we make more money and have more upside in these kinds of markets. We’re excited by volatility, value, bounce backs – the whole gambit… so stay with us… we’re in for one hell of a 2019 and beyond. That said, with the markets being closed early today, and all day tomorrow… now is a good time to prepare for what’s coming next.
If you aren’t working on your best idea right now… you’re doing it all wrong.
That applies to trading as well. Find out what your strengths are, then try to maximize them.
In my case, I have been able to yank out +$145,188 in 2015, and +$330,000 in 2016 in trading profits…In 2017, I donated all of my trading profits, over $232,048.28, in which I split up and gave to 14 charities.
How have I been able to do it?
I’ve been able to do it by spotting 3 patterns in the market, that occur regularly. Over my years of trading, I’ve recognized them as high probability setups. And based on my results… they’ve been very good to me.
Rinse and repeat…
With more than 250 trading days in year… it’s hard to maintain your discipline all the way.
Sometimes we’ll experiment with trades… or… try some ideas that other traders are having success with… or… we’ll get on a hot streak and think we are invincible… or… get into something we don’t fully understand (because the FOMO is too strong).
In the trading world, there is a word for that… it’s called style drifting.
And if you ask any good trader who gets in a slump, they’ll tell you that it’s often because they went away from what was working and started style drifting.
If you go to a Pizza Hut anywhere in America, their menu is pretty consistent. Imagine if they drastically changed their menu every day? It would make no sense.
However, if trading is supposed to be treated like a business… why do we style drift?
You’re probably wondering, “What is style drifting?”
It’s when you diverge from your trading style and goals.
Now, the more experience and success you gain as a trader, the more honed in you are with your money-making strategies.
Once you’ve figured out your bread-and-butter setups, you’ve defined your trading style. For me, I excel in small-cap stocks – focusing on patterns, values, and catalysts.
But how do you know which trading strategies are working and which ones aren’t?
Well, there are ways to prevent style drifting:
- Categorizing your tradesTrading stocks is a business. At all times, you need to know what works and what doesn’t. For example, if you’re running a business that sells products, you would categorize your best selling from your worst selling items.
The same is true for trading. When you’re categorizing your trades, ask yourself:
- Did I make or lose money on the trade?
- What type of trade was this – was it based on fundamentals and technicals?
- What was the timeframe of this trade? Was it a swing or day trade, or was it a long-term hold?
- If this was based on technicals, which pattern did you use?
- Were there any catalyst events?
Once you’ve answered all of these questions, you would have something like this:
Company name (ticker) – winner / loser, fundamental / technical / catalyst, swing / day / long-term, fish hook / breakout / continuation pattern, catalyst / no catalyst.
Once you have enough trades and categorize them accordingly, you’re able to figure out what’s working and what’s not.
Unless you’re a savant who has a photographic memory, chances are you won’t be able to remember every single trade. With a detailed journal, you could review your trades and figure out what’s working for you and what’s not.
Now, journaling and categorizing your trades go hand in hand. Every trade you make, write about it. Write about your mentality, sleep patterns, eating habits, etc.
Remember, you have to take the good with the bad. Write about your mistakes, as well as prosperities.
For example, if you review and notice that you’re consistently making money using chart patterns…then you need to maximize those trades. Moreover, if you realize you don’t make money off of fundamental analysis strategies, you need to cut those.
- Planning your trades
Plan the trade and trade the plan. Once you figure out your bread-and-butter setups, planning your trades helps to prevent style drifting. It’s hard to go against a plan once it’s written or typed out.
For example, here’s a look at a trading plan that was alerted to members in Millionaire Roadmap (MR).
Now, this is one of my favorite chart patterns to use – one that has helped me build my wealth over the years. Now, I planned the trade and was looking for a breakout.
Well, here’s what happened with the trade.
As you can see, once I wrote out my plan, it was pretty hard for me to deviate from the trade.
Now, you shouldn’t beat yourself up if you style drift. Just journal about it, and find the root cause of why you style drift. For example, there was one trade in which I style drifted…I had FOMO and entered an options trade in Apple Inc. (AAPL) – something I don’t normally do, but felt like it was worth taking a “shot” given how hard the stock had sold off over the course of the last month.
I was riding high and traded great over the past few months, but my confidence got to me…leading to a costly trading mistake (my worst loss this year).
What am I doing to get better?
Go back to the basics. Stick to what I know best. Also, follow the same guidelines I’ve laid out here for you today.
That said, all experiments and new strategies are off the table for me. Over the years, I’ve developed a trading style that has real edge… no reason to deviate from that now.
The diary of a real $ trader,