Two Kinds of Traders Who Fail to Succeed

There are also two kinds of traders who fail to find success: those who cannot adapt and those who cannot focus and exploit their edges in markets. Of course, it is hard enough to find a tradable, consistent edge that puts the odds in your favor. But after you reach that point, you must accomplish two other things. The first one is the laser focus — you must be focused on exploiting that edge and not be distracted by other market temptations, such as trading outside of your well-defined edge. The second one, in my personal opinion and based on many years of trading experience, is the most difficult challenge a consistently winning trader faces. That challenge is answering these questions:

Is my trading edge still working?

Is it still a valid trading edge, even after a two- or three-week losing period?

Should I change the parameters?

Should I look for a new trading edge to replace this one? Do I need a new trading system with a new concept behind it?

There is no perfect way to address these issues, but I will tell you what I do when faced with these dilemmas. I draw the equity curve for my trades using that edge/system/methodology, and I check whether there is a sudden trend change in that equity curve. Sometimes, it’s just something that has happened a few times in the past, and I do not need to worry about it. I am always looking for new systems and new edges, and I spend about ninety minutes a day researching the markets. Sometimes I am just refining my current methods, but at others, I’m looking for something brand-new in case I find myself in the situation of having to change my core trading edges.