Over the years, I've been struck by how many top performing discretionary traders don't have win percentages of much over 50%. Most of their trades are relatively small winners and relatively small losers. They are *very* good at risk management and so they have very few large losers. But they are also good at recognizing their best opportunities--what we might call their A+ trades--and making the most of these. In his book One Good Trade, Mike Bellafiore of SMB Capital stresses that, "Consistently profitable traders obsess about making One Good Trade and not money. Your job is to make One Good Trade and then One Good Trade and then One Good Trade" (p. 31).From this perspective, One Good Trade includes losing trades that one manages well. One Good Trade also refers to profitable trades that follow one's trading rules. If my above observation is correct, however, trading success also requires awareness of One Great Trade: one's A+ opportunity. It's the relatively few big winning trades that account for the difference between most good traders and the great ones. It's the (all too rare) combination of disciplined risk management and aggressive pursuit of special opportunities that define the great trader.
Having met with many traders over the years, I can confidently say that the great majority don't know--in detail--what goes into One Great Trade. They might have a sense for good opportunities, which they might call A trades, but they haven't truly studied their A+ trades: those few trades in a month or year that account for a large share of total profitability. What goes into an A+ trading opportunity? If you don't study those One Great Trade occasions in detail, replaying them and analyzing them intensively, how can you find the conviction to pursue them with aggressiveness?
I've been studying my own A+ trades and opportunities and will share them in an update to this post. But my unique opportunities are unlikely to be yours. Anything great cannot be copied from someone else, whether it's a painting, musical work, or writing. The odds are good that your A+ opportunities are hiding in plain sight. They are among your standout winners, even though you may not have fully exploited their potential. Much of the time, we become so immersed in solving trading problems and controlling trading emotions that we never fully study our trading strengths.
One Good Trade keeps you in the game and can make you consistently profitable. If you can identify One Great Trade, you'll have a template for success that you can build upon.
More to come.
Further Reading:
Finding Our Greatness
.
Posts
