Like the trading world, the diet world also has great controversies over how to lose weight. Some swear by low carbohydrate diets, others think vegetarianism is the way to go. There are successful trainers that argue over the ratio of optimum carbohydrates, protein, and fat in the diet. Then you have the diet books that vilify different things. Refined sugar or flour is the worst thing you can eat; no it is meat and saturated fat that will kill you.
On and on the diet wars rage. With the odd thing that you have slim and healthy people on different sides disagreeing. How is that possible? Well regardless of the details, and many of these diet books state facts, the bottom line for losing weight is that your body burns more energy than it consumes and stores as fat. That is it, input versus output the rest is just details.
But, what in the world does that have to do with trading? You want me to get to the point?
DIFFERENT TRADING METHODS
Well, in our trading world we have traders that swear by their trading methodology. Elliott waves, chart patterns, moving averages, Fibonacci, trend following, momentum traders, swing traders, option buyers, option sellers, day traders, reversion to the mean traders, CAN SLIM investors, growth investors, even value investors and traders in all different markets futures, forex, commodities and on and on.
Many believe in their methods with a religious fervor. Half their battle is won because they are able to consistently trade their method with faith and self confidence because it has been a winner for them in the past and they believe it will pay off in the future as well. Once they have locked in their faith in themselves and their method that is generally a breakthrough point. They have won the mental game of trading a method. They know who they are and what they have to do.
Is this faith warranted? There are many ways to make money in the markets. The whole point is to trade a method that turns profits by having high probability entry points that give the trader the odds of making money on trades. A trading system is profitable if all the winning trades are bigger than all the losing trades, that’s the bottom line regardless of any other consideration, even a high winning percentage will not make a trader profitable if the losses are so big they wipe out the profits.
MY APPROACH
I trade using moving averages and prices as trend indicators. I once noticed that I was long a trade at the same time a pattern trader was also long with a momentum trader long the same thing. Then a CAN SLIM investor also had the same trade over a longer period of time.
How could four traders with four different methods all have the same long position? All four of us entered the same trade because we identified it as a trend based entry on our own method.
All traders, regardless of their methodology are trying to be profitable by indentifying a trend, whether it is a trend off a support level, a trend to the downside, a trend after a break out to new highs, a trend to a Fibonacci level, or an Elliot Wave trend. Or even for option sellers the lack of a trend to their short options strike price. In trading every method is all about indentifying trends to trade for a profit.
How can all these different traders that use different methods be profitable? They have all found ways to make money trading a trend and have the courage tostick with it.
Regardless of the details the bottom line for making money in trading is to have a robust method for trend identification and to then follow that method with perseverance and discipline while managing risk. Most everything else is just noise.
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