Trading was HARD Until I Learned this BASE HIT Strategy

Summary

In this trading-focused episode, the host recounts a pivotal moment in 2017 that transformed their trading approach. After a tough loss, they analyzed their trading data and discovered that consistent, smaller 'base hit' trades were more profitable than infrequent 'home run' trades. This insight led to a strategy shift, emphasizing discipline and smaller position sizes to minimize risk and maximize gains. The episode also touches on emotional trading pitfalls and the importance of having a solid strategy and the emotional fortitude to stick to it.

Takeaways

• 😌 The trader's journey to consistency and profitability involved a significant turning point in 2017, which led to a change in strategy and a more stable trading career.
• 📉 Prior to the turning point, the trader experienced a cycle of large gains and losses, causing emotional stress and an inconsistent equity curve.
• 📊 After a particularly bad loss in September 2017, the trader analyzed 10 months of trading data, leading to a discovery that shifted their trading approach.
• 🤔 The trader found that the top 25 biggest winners and losers did not account for most of the profits, which was a surprising revelation.
• 💡 The real profit came from a large number of smaller trades, which were more consistent and less emotionally taxing to manage.
• 🚫 The trader realized the importance of not 'swinging for the fences' and instead focusing on 'base hits' with smaller position sizes.
• 📉 The emotional impact of trading can lead to 'emotional hijack', causing traders to deviate from their strategies and take high-risk trades to recoup losses.
• 💼 The trader emphasizes the importance of having a strategy, discipline, and the ability to manage emotions as key to long-term trading success.
• 📈 The trader's equity curve shows ups and downs, illustrating that even experienced traders face challenges and setbacks.
• 🛑 The trader sets a daily maximum loss limit and adjusts position sizes based on market conditions and the stock being traded.
• 🏁 Trading is described as a marathon, requiring daily discipline and the ability to handle the emotional ups and downs of the market.

Q & A

What was the turning point in the trader's journey that significantly altered the trajectory of his trading career?

The turning point occurred in September 2017 when the trader analyzed his trading data from the previous 10 months and discovered that his profit didn't come from his top 25 biggest winners and losers but from smaller, more consistent trades.

What was the trader's initial belief about his success in trading?

The trader initially believed that his success depended on hitting home runs, meaning making large profits from a few significant trades.

What did the trader find when he analyzed his top 25 biggest winners and losers over the last 10 months?

He found that his top 25 biggest winners amounted to $215,000 and his biggest losers amounted to -$23,000, which was surprising because the profit from these trades was not as substantial as he expected.

What was the trader's discovery after further analyzing his trading data?

He discovered that his actual profit came from a large number of smaller trades, where winners between $0 and $4,000 amounted to $510,000 and losers between $0 and $2,000 amounted to $156,000, resulting in a net profit of $354,000.

How did the trader's strategy change after his discovery?

He decided to reduce his share size and focus on base hits instead of trying to hit home runs, which led to more consistent profits and less emotional stress.

What is the trader's advice on managing emotional hijack during trading?

The trader advises to accept reality when a loss occurs and not to let emotions dictate trading decisions, as emotional hijack can lead to taking high-risk trades in an attempt to recoup losses quickly.

What was the trader's starting balance when he started his small account challenge on January 1st, 2017?

The starting balance was $58,315.

How much profit did the trader make in the first month of his small account challenge?

In the first month, he made a profit of $116,000.

What is the trader's daily trading goal and maximum loss limit?

The trader's daily trading goal and maximum loss limit are both set at $5,000.

What is the trader's approach to adjusting his trading strategy based on market conditions?

The trader adjusts his position size and daily goals based on market conditions, the price range of the stock he's trading, and his performance on any given day.

What are the two main reasons the trader believes most people fail in trading?

The two main reasons are not having a strategy or system in place, and not having the discipline and emotional control to follow the rules of the strategy.