In this short article, I’d like to summarize 5 of the most important things I’ve learned about successful trading, being an independent full-time trader for over 11 years and a fully automated trader for about 7 years. I find all these lessons very important and, in my opinion, no trader should ignore them on their road to success.
Lesson 1: Refined simplicity
I have to admit that I’ve come a long way since I began trading.
Many years ago, I started trading very simply. It was very basic and, to be honest, it didn’t work well. In today´s market, you definitely need more than the usual, basic trading stuff you’ll find everywhere on the internet.
Later on, over the years, I’ve slowly moved to a more sophisticated method of trading, full of very advanced algos, complex know-how, mathematical and really insane trading concepts.
What was the result of that?
The more complex my trading was, the more never-ending technical problems I constantly had, becoming like a snowball effect! The complexity was a nightmare and I found out that this other extreme didn’t work either.
In the end, I realized that the trick to success in trading lies in refined simplicity.
Many rather basic trading concepts can still do pretty well, if you can bring something genuinely new to them. That sounds easy to do, but it’s definitely the hardest part. After 11 years, I try to keep everything rather simple, but always with some refined, strong and new quality. This keeps my overall workflow manageable, but still brings up extraordinary automated trading systems with great performance.
Lesson 2: Creativity
Like it or not, trading is 40% about being technical and 60% about being creative. Honestly, to me, creativity is still 80% of my success.
What counts is the idea. It’s the overall concept that gives you the edge. The more you think outside the box, the more creativity you bring to trading, the faster you’ll find great systems and more efficient ways to trade them, and most importantly, the more ideas you’ll bring to your risk management.
Coding is the easy part and being a good programmer and having the greatest technology still don’t mean much.
I personally know many extremely talented programmers who can code just about anything, but they don’t make a penny in trading. They just lack the necessary creativity to come up with out-of-the-box trading ideas and see the whole picture. They aren’t able to invent new, viable and fresh trading concepts.
I’m blessed and very fortunate to be a highly creative person and, after all those years in markets, I increasingly see how important the creative part is. So, this is where I’d really like to encourage you to become as creative a trader as possible; don’t be afraid of creativity as any crazy idea can become a future winner. Spend less time with all those technical «latest exciting features». Instead, devote more time to thinking up good trading concepts.
I try to create at least one new out-of-the-box idea weekly to keep myself highly competitive in the world of trading. Just let’s face it: today’s world is about ideas. Look at billionaires nowadays. They don’t discover new factories, new products, or commodities. They come up with ideas, usually in the field of technology. Automated trading is very similar to that: you need fresh ideas – plenty of them and fairly non-stop.
Lesson 3: Patience
Everything in successful trading takes time – a lot of time. There isn’t any quick-rich-scheme. It’s an extremely serious business and you have to build it up step by step. Despite all the marketing hype about trading there is everywhere, with all-the-latest-is-the-greatest platforms, indicators and other highly marketed stuff, there simply is NOT a shortcut. If you want to think about trading seriously, think of it the same way as if you were building a company. It is a serious business. Yes, you can do it from the beach if you want (I personally do sometimes) or even travel a lot while doing it (as I do often), but it still has to be treated as a serious business. And it all needs a lot of patience. If you try to rush it, you are very likely to be just gambling, not building a serious way of making an income.
Trust me. I still need to be patient with everything. I have to be very patient to get my codes tweaked and work properly, to test any new trading idea deeply, to see how 99% of my system candidates don’t pass my ultra-tough robustness testing, to wait weeks and sometimes even longer to recover from occasional drawdowns. It’s all part of the game. The faster you become a patient person, the faster you’ll be a highly successful trader!
Lesson 4: Persistence
Every successful business has its great times and its challenging times. It is the same with trading.
I’ve recently read an interesting article about bloggers, saying that 90% of bloggers stop blogging after the first year and end up completely forgotten. The remaining 10% persist and later on are usually very successful. The same applies to trading.
Trading is a journey in which you do need to make some painful mistakes to learn the most valuable lessons from them and never make them again. You also have to test 100 great looking ideas, to see that only one of them is really that great and makes you money.
You need persistence-a lot of it. The good part is, that as harsh as it sounds, the reward is usually worth all of it. Yes, you can make a lot of money in trading, you can have a great life and a lot of freedom to do what you want and when you want to, but it isn’t for free.
If you aren’t persistent, you cannot build anything.
Lesson 5: Diversification
And lastly, this is a highly important lesson that cost me a lot of money in the past.
To achieve as stable an income as possible in the automated trading, you need to diversify more than you think, using several systems, several markets, several timeframes, several trading styles. The more you diversify, the more you’ll smooth the equity.
This is also why I constantly work on new strategies – to keep myself diversified to the greatest possible extend. Sky is the limit. I love thinking about new strategies and new trading ideas (I usually get the best ones while traveling and especially in Singapore) and I frequently revise my portfolio. Even if you have a very small trading account, just a few thousands USD (don’t worry, I started with the same amount of money), you still need to have diversification in mind, from the very beginning. Even two trading systems are better than just one.
Also, as you grow with your trading account, don’t think about adding contracts. Think about adding systems, instead. I personally call this concept «systems sizing» instead of the usual «position sizing». I might write a separate article on system sizing in the future (so keep tuned and watch this blog, you can also sign up for the e-mail alert anytime a new article is posted).
Anyway, many say that diversification is the Holy Grail of successful trading. It isn’t the only one, but it’s a very important one.