The Real Reason Why Your Trading Is Not Improving

Summary

This video explores the concept of building a sustainable trading edge by embracing the learning curve. It highlights the importance of balancing mechanical strategy (80%) with subjective experience (20%), which helps traders develop unique insights over time. The speaker warns against skipping the learning process, stressing that real improvement comes from overcoming personal challenges and continuously adapting to market changes. By identifying individual problems and finding solutions through trial and error, traders can create a personalized edge that evolves with their experience, leading to long-term profitability.

Takeaways

• 😀 Trading is the only skill where many try to bypass the learning curve, relying on shortcuts like magic indicators, signals, or demo trading.
• 😀 The 80/20 rule in trading: 80% mechanical and objective, while 20% is subjective, relying on personal experience and decision-making.
• 😀 A retail trader's edge is largely based on their unique experience and ability to adapt, not just mechanical strategies.
• 😀 The learning curve is critical in trading, and it can only be improved through trial, error, and consistently overcoming problems.
• 😀 Skipping the learning curve, like relying solely on indicators or signals, is a mistake that leads to stagnation and failure in the long run.
• 😀 Problems faced during trading should be viewed as opportunities for growth and learning, not obstacles to avoid.
• 😀 Understanding and developing a trading plan with a solid mechanical foundation allows for a more focused and effective approach to trading.
• 😀 Journaling your trading experiences helps identify problems, leading to personalized solutions and continuous improvement.
• 😀 Every trader’s edge is unique because it’s built from personal experience and the ability to solve individual trading challenges.
• 😀 The market is always evolving, and traders must make small, continuous adjustments to stay effective rather than sticking to rigid strategies.
• 😀 Social media and copying others' strategies can mislead traders by offering solutions to problems they don't have, which can skew their own edge.

Q & A

What is the 80/20 rule in trading and why is it important?

The 80/20 rule in trading suggests that 80% of your trading plan should be mechanical and objective, while 20% should be subjective. The mechanical part ensures you have a baseline for trading and avoid making irrational decisions, while the subjective part allows for personal experience, decision-making, and gaining insights into patterns, leading to a potential edge.

Why is a retail trader's edge different from that of institutions or hedge funds?

A retail trader's edge is often based on a mix of mechanical and subjective decision-making, allowing for flexibility and adaptation based on personal experience. In contrast, institutions or hedge funds typically rely on more systematic, algorithmic approaches that are built on massive amounts of data and automation.

What role does experience play in building a trading edge?

Experience plays a crucial role in building a trading edge. The more time a trader spends in the market, the more they learn from their mistakes and successes. Experience helps refine risk management, decision-making, and psychology, allowing traders to improve and adapt their strategies over time.

What is the usual learning curve for traders, and why do many retail traders fail to progress?

The typical learning curve for traders starts with basic knowledge, and as they encounter problems, they adjust their approach. However, many retail traders fail to progress because they give up after facing difficulties, switching strategies constantly without fully committing to a single approach or learning from their mistakes.

How does skipping the learning curve affect a trader's progress?

Skipping the learning curve—by relying on indicators or external signals—can prevent traders from gaining the necessary experience to truly understand the market. It creates false expectations and often leads to failure, as traders try to jump straight to profitability without mastering the foundational skills.

What is the 'shiny object syndrome,' and how does it impact traders?

Shiny object syndrome occurs when traders chase after new strategies or concepts that promise easy success. This distracts them from committing to a single strategy and can prevent them from building a solid foundation in trading, leading to confusion and a lack of consistent results.

Why is it important to find a trading style that resonates with you?

Finding a trading style that resonates with you is important because it aligns with your natural strengths and cognitive abilities. This helps you learn faster, as you are more likely to stick with it, improving your chances of becoming proficient and building a profitable edge.

How does self-awareness contribute to building a unique trading edge?

Self-awareness is key in building a unique trading edge. By understanding your strengths, weaknesses, and personal preferences, you can tailor your trading plan to fit your style. Recognizing your problems and solving them based on your own experience, rather than copying others, is what helps you develop an edge that works for you.

Why do traders need to constantly update their strategies and evolve with the market?

The market is always changing, and strategies that worked in the past may not always be effective. Traders need to constantly tweak their approach to stay in sync with market conditions. By making small adjustments over time, traders can maintain their edge and avoid stagnation.

How can journaling help traders improve and identify problems in their strategy?

Journaling allows traders to track their trades, decisions, and performance over time. By reviewing their journal, traders can identify patterns, recurring issues, and areas where they are making mistakes. This process helps them implement solutions and improve their trading strategies incrementally.