Don’t Ever Tell Me Entries Don’t Matter

Boris Schlossberg

Of all the white lies we always hear -- “it’s not you it’s me”, “size doesn’t matter”, “the food is interesting” -- none is more pernicious than the old trading maxim “entries don’t matter, only exits do.”

Could. Not. Be. A. Bigger. Bull-t. Statement. If it tried.

Here is the truth about trading. Exits are FIXED. You never, ever, ever know if the move will go 10 pips or 100 pips or a 1000 pips in your direction. So you chose the highest probability exit for the time frame you operate on and YOU STICK TO IT. All those idiotic tricks you see about “trailing your exits” never work in real life because prices always slide to your break even points and all those huge profits on the chart are mostly an illusion. So if you want to be a pro at this you fix your exits to your time frame. I, for example, take profits at 10 pips on my day trades. Kathy looks for 70-80 pips on her swing trades. We do this over and over and over -- because like all professionals we seek to replicate best practices.

Entries on the other hand are everything. I spend all of my time working and refining my entries. In my trading room we call it “posture”. The better your entry, the stronger your posture -- the easier it is to manage the trade to profit.

Did you know that one of the greatest intra day LONG trades in the history of the stock market was during the 1987 market crash? I am old enough to actually remember it as I sat mesmerized staring at my Quotron at 60 Broad Street in the old Drexel Burnham Lambert headquarters. That day -- the greatest percent decline day in the history of the market -- stocks rallied more that 10% off their lows right after lunch before fading once again into the close. If you bought that bottom as some futures traders in Chicago managed to do, you made a fortune on a day when everyone else was losing their life’s savings.

Entries of course are notoriously difficult. It’s hard to time the price to one or two ticks of a turn. That’s why as a trader you ultimately resort to probabilities and usually do an array of entries in order to get a blended price as close to the turn as possible. That little trick works in investing too. There is simply no better way to make money in the long run that to dollar cost average into an index. That strategy will beat any hedge fund return over a decade or more of application.

To give you an idea of the power of blended entries, I downloaded a random set of daily Dow Jones Industrial Average data from Google. It just so happened that I pulled down 18 months of closes from start of 2008 to mid year 2009. So I ran a little Google sheets experiment. There were 125 trading days in 2009. If I invested 125,000 on Jan 2, 2009 by mid year my stake was worth about $120,000 as the DJIA slipped a bit. If, on the other hand, I invested 1000 dollars each day, by mid 2009 my $125,000 stake was worth $130,000.

That was nice, but it was truly mind blowing to run the numbers through 2008 -- a year when the Dow collapsed from about 13,000 to about 8,500. There were 253 trading days in 2008 so $253,000 invested at the start of the year withered to just $165,000 by the end of it. Buying 1000 dollars at a time I still lost money, but considerably less -- my stake declined to $200,000. Overall in the 18 month period from 2008 to mid 2009 there were 378 trading days. If I poured all that money in at the start of 2008 my $378,000 investment would have declined to less than $240,000 after 18 months of being in the market.


However buying 1000 dollars each day that same $378,000 stake was worth $325,000.

Now you tell me -- which investor would have the mental strength to stay in equities to take advantage of one of the greatest bull markets in history that was to follow -- the guy with 85% of his money left or the guy with 63% of his funds?

Don’t ever tell me entries don’t matter.

The Three S’s of Trading Success

Boris Schlossberg

One of the dumbest things I heard about trading is this very common refrain. “Trading is simple. All you need is a strategy with positive expectancy and the discipline to follow it.” That statement is so stupid on so many levels that I just shake my head in disgust whenever hear it.

First of all -- THERE ARE NO STRATEGIES. As I’ve said a thousand times before there are only two trades in any market -- continuation or mean reversion. What some traders call strategies are simply structures. Any algo that has a logical ruleset of IF A then do B is simply a trading structure designed to superimpose order on an essentially chaotic and mostly random activity. So no, your wonderful 500 lines of MT4 EA is NOT a strategy it’s just a STRUCTURE through which you choose to express your trading.

What turns that structure into semblance of a strategy is SELECTION. Now I know that all of you EA traders will start to tell me that you don’t select. You just lay it on your charts and go. Ha! What charts do you put your structure on? What pairs do you trade? What time of day do you trade? Do you turn off for news? Yadda Yadda Yadda. Even if you do none of those things you are still making an implicit selection -- you are basically betting on diversification which a choice like any other.

Selection of course is the art of the trade. No matter how good your structure. No matter how well you’ve thought things through, selection is actually the difference between winning and losing. And selection does not come from a back test. It comes from experience. It comes from observation. It comes from that most “unscientific” of places -- feeling the market. Feeling the market is no different from any other skill. You need to watch and watch and watch the screens and only then will you learn which price action to avoid and which to attack.

I am always amazed at the level of progress we made in my trading room. We now have many traders who are banging out 0.5%-1% per day -- and it’s certainly not due to the “brilliant” trading structure that I teach them, but rather to their ability to feel the market and analyse the key levels. The longer people trade with me, the more they observe the market, the better they do.

One key thing that everyone in my room does is use wide stops. This is yet another trading “rule” shattered to bits. Right after “ you gotta have a strategy” meme the second stupidest thing that gurus tell you is “use tight stops.” Except for martingaling nothing has lost more people more more money than tight stops. Tight stops are essentially a guarantee that you will lose all your capital in tiny little chunks or certainly die trying. Tight stops is the trading equivalent of a death by thousand cuts.

Most naive traders believe that stops are linear. In other words you are twice as likely to get stopped out with a 10 pip stops as with a 20 pip stop. WRONG! Because of the natural oscillation of the auction model ( which is what all speculative markets are) your chance of getting stopped out on a 10 pip stop is probably 4 to 8 times higher than on 20 pip stop and so on and so on. A good rule of thumb is that you want to use 1/2 the daily ATR which for most major pairs is about 50 pips as a proper stop value. That’s tight enough so that no single day’s loss will ruin you, but wide enough to avoid most of the intra-day noise. After all the function of successful trading is to AVOID stops as much as possible.

Here is a discount to our trading room

So STRUCTURE, SELECTION and STOPs are the three keys to successful trading -- and you really do need all three to work together like a fine tuned machine in order to bank those pips every single day.

The Most Overlooked Trading Skill is … Impatience

Boris Schlossberg

My partner who hit something like 44 out of 50 winning trade calls is a perfectionist who is never satisfied. This week she managed to bang out three winners in a row in everything from GBP/CAD to USD/JPY but still vented to me about how she cashed out too early as we watched some of the positions move higher.

Since I only day trade, my job during those conversations is never to offer my personal views but to basically be her therapist, keep her mind focused on the next trade and most importantly never, ever let her think that she should change her ways. While K deserves complete credit for her brilliant fundamental calls this year, I take a small measure of pride in knowing that my emphasis on posture and tactics helped guide her positional ideas to profit so many times over the past few months.

That’s because as someone who trades price action rather than fundamental themes, I have learned the very hard way that patience in trading is as much a vice as virtue. After thousands of trades and years of screen watching I have concluded that there is only two way to make money in the markets.

You can be patient with your entries or you can be patient with your exits -- but you can’t be both.

As a day trader I let price come to me. Indeed everything I do revolves around being patient about price entry. The more selective I am the better I trade. This is a lesson so burned into my mind by market experience that I literally never question it anymore. Do I miss out on profitable trades? Absolutely. Does it matter? Not at all. I can miss out on 10 great trades ideas, but as long as I avoid a big loser I am way ahead. Like an insurance company I would rather pass up on underwriting a group of healthy men if I can avoid insuring someone in that cohort who contracts an incurable disease.

Which brings me to impatience. It’s one of the most overlooked skills in trading. How many times have you been in a trade and something just didn’t seem right? It didn’t move your way or only moved partially and stalled or moved against you then came back to small profit and just hung there. Nine out of ten times you probably let the idiotic belief in “patience” override your instincts. And maybe, just maybe you were proven right, Holding that position ultimately proved profitable.


There was one time when you could have gotten out even or at a small loss, but instead you held on and BOOM! You lost all your money. That’s right. Many times the market actually punishes rather rewards patience. In fact here is a thought for you -- EVERY SINGLE MARGIN CALL EVER MADE IS A RESULT OF “BEING PATIENT”.

So in my old age I’ve learned to wait and let them come to me and then once they do I’ve learned to let them go quickly -- win, lose or draw. In fact in studying my trade data I know that 80% of my winning trades resolve within 1 hour. If I am still holding inventory past that time my only thought is get the f- out, profits be damned. Does that mean that I often have to make 3 trades to make as many pips as other traders in my room make in one? Yes. But it also means that I am flat and able to look for the next idea while they are nursing repairs that could quickly turn into nasty losers.

Here is a discount to our trading room

So what does this have to do with K? Well just like my day trading tactics I have helped her develop an appreciation for letting the price come to her and once it does, to consider booking profits even if there is more meat on the bone. All those trade ideas she beat herself up about this week? They turned into losers 24 hours after we got out of them.

You Will Never Make Money With a Trading System …

Boris Schlossberg

Let’s start with the basic fact of trading. No system -- no matter how good you think it is -- will ever make you money otherwise every EA buyer in the world would be a millionaire. And yet… hard as I look I can’t seem to find any EA millionaires in FX. There are plenty of demo millionaires. There plenty of ads that promise an EAs will make you a million for only $9.99 plus a tub of tupperware, but … There. Are. No. Actual. EA. Millionaires. Like unicorns they seem to be creatures only of our imagination.

Ok. Let me set my snark aside and tell you right up front that I actually LOVE trading systems and I use EA’s for every single trade I make. Yet I am not foolish enough to believe that this is the source of my profit. A system like a scalpel is simply a tool. In the hands of a gifted surgeon it can do marvels. In the hands of klutz it will just cut you badly and make you bleed out.

One of the greatest joys of my trading life this year was to create a live trading room that allows me to observe on a daily basis the variety of ways that the same system can be used by many traders. In our Slack room we now have more than 400 traders from across the world all trading essentially the same old fashioned market making method that I adopted for retail trading We all use the same EA, look at the same currency pairs and follow similar risk management rules. Yet while someone like me may only lay down out 3-5 trades per day another trader in our room will do as many 40 trade cycles in a 24 hour period.

Here is the kicker. We both make money, we both follow the rules and we both trade the same system -- but you would never know it if you just looked at the P/L runs of our accounts. The reason is that no matter how mechanical we want to be -- we are all human, all different in temperament, style and philosophy.

I trade essentially like someone with PTSD -- firmly believing that old Andy Grove observation that just because you are paranoid it doesn’t mean they are not out to get you. I view the market as field full of landmines and try cross it as quickly possible avoiding a misstep at any cost. That means that I often pass up many profitable trades or get out too early, but I live to trade another day.

The 40 trade per day trader on the other hand operates with the stoicism of Marcus Aurelius. He trades every set up to its full conclusion -- good, bad or ugly. And he does it with a sense of serenity that I can never hope to achieve. He makes 1%-2% per day like clockwork- but when he gets clipped -- he can lose 4% of his capital in the blink of an eye.

Here is the thing though. Instead lamenting our particular foibles we should embrace them. It is after all our individuality that makes us unique and valuable. Instead forcing ourselves to adjust to the system which is what so many traders try to do, we should adapt the system to our own personality.

Here is a discount to team trade with us

That’s why no system can make you money until you make it your own. So no, all those EAs sitting in your Experts folder aren’t going to “make it rain”. Not until you begin to understand not only the science, but the art behind their algorithm.

Why I Never Invest

Boris Schlossberg

New York City taxicab medallions. For many decades they were considered the gold standard of lending and banks would often loan up 90% of the one million plus face value of those things because they were assumed to be the safest of assets.

The New York City taxi business was an insane industry. Taxi licenses were frozen at 11,000 (set sometime in the 1930’s) thus creating an artificially scarce resource for a city of more than 2.5 million people (the city for anyone who is not a New Yorker refers in this case to Manhattan only).

For the longest time the only certainty in New York were death, taxes and the fact that Taxi and Limousine commission would never issue any more medallions. Banks were only too happy to lend against a scarce and ever appreciating asset because it always paid back.

Then came Uber.

Suddenly, the smelly, dented chariots of death -- often driven by men who spoke little or no English and possessed less driving skills than an average 15 year old high school student -- weren’t so popular anymore. People could hail big, immaculately clean Toyota Highlanders that drove through the potholes of New York city with nary a bump, and jump out without even taking out their wallet to pay for the ride.

Today I read in the New York Times that all those banks who made “safe” medallion loans are scrambling to offload them as their value plummets to its much deserved nothingness.

New York City taxi medallions is the reason why I never invest. They are a cautionary tale of how almost every investment thesis can be undone by unforeseen forces which only become obvious once you’ve lost all your money.

You think the medallion story is unique? Absolutely not. When it comes investing it is very much the rule rather than the exception. Take a nice safe consumer stock like Coca Cola. What can be more conservative and reliable than that? After all everyone drinks Coke.

Except that Coke is probably the most toxic substance that you put in your body on a regular basis. Certainly it is the most toxic thing that children consume.

How many packets of sugar do you think are in one twelve ounce can of Coke? One, two, five, six, seven, ten? Try twelve. That’s right. If I gave your child a glass of water and then dissolved twelve packets of sugar in it and made him drink it you would probably report me for child abuse. Yet, we allow our kids to consume not twelve not twenty but sometimes thirty ounces of soda a day.

Not anymore however. A recent study has found that 63% of Americans now actively avoid drinking soda understanding that it is a big cause of obesity and diabetes in this country.

Now I couldn’t care less about Coke as a product, but if you are investor thinking people will always drink Coke and that those dividends will always be there. Well .. good luck.

Good luck also to all those who invest into Exxon, BP and all the carbohydron multinationals. These are some of the biggest companies in the world, but ten years from now we will probably get most of our energy from solar and the combustion engine will only exist in a museum.

When people tell you that investing is hard -- this is what they mean, You can never know where the competitive threat will come from, but given Murphy’s law you can be almost certain it will come at your investments. As the recently departed Yogi Berra said, “Its tough to make predictions, especially about the (distant) future.”

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That’s why I prefer to daytrade instead.

Trading or Gambling – Here is the Answer

Boris Schlossberg

Can the New York Times be any more condescending in its coverage of the latest “outrage” of the week -- the phony scandals in the two sports based fantasy websites in US. Suddenly just like Claude Raines in Casablanca they are “Shocked! Shocked! that gambling is going on here.”

Except that it is not.

In this video the “paper of record” can barely hold back its distaste for the whole sordid enterprise of fantasy sports even as it interviews one of its most successful practitioners -- a college student from DePauw University who has made hundreds of thousands of dollars betting on sports events. He patiently explains to the reporter how we diversifies his bets, optimizes his player picks and constantly re-evaluates his line ups. In other words he is doing everything that a successful prop trader would do. Yet the Times can’t help but smirk at the volatility of his returns as “evidence” of gambling.

This is wrong on so many levels because it is the same ill informed insult casually tossed at anyone who tries to speculate in the financial markets. “Aren’t you JUST gambling?” is question I get all the time typically usually wrapped in a smarmy smile and a look of pity.

No moron. I am not.

Gambling is a fixed odds system in which the participant is guaranteed to lose against the house. So in blackjack, craps, baccarat, roulette the odds are always at least 50.5% to 49.5% against you. That means that no matter how much money you have if you play long enough you will lose it ALL. There is absolutely no doubt about that and the critical point to understand is that all casino games are FIXED odds structures which is why you should never play them.

Now the moment you change those rules, the moment for example, you start counting cards at blackjack, you no longer have a fixed odds system and you actually have a dynamic market in which skill can win. That’s why casinos hate card counters and ban them the moment they spot them. Casinos love the create the “illusion” of a market but their game is very clearly and very deeply rigged.

Everything else in life is just a market with open ended -- and more importantly -- dynamically changing odds of success.

Is walking against a red light in front of my house on Broadway gambling? For that matter is walking against a green light gambling too? Well at 4 AM in the morning when the road is barren the answer is pretty much no. But at 4 PM in the daytime when some stupid Jersey tourist doesn’t know that there is no right on red in New York and decides to swerve a Chevy Tahoe in your face -- well the answer could yes.

My point is that it its incredibly stupid to refer all betting activities as gambling without understanding the underlying structure of the game. Otherwise everything we do in life, from what we put in our mouth, how we choose to make money, to what person we decide to marry is “gambling”. Its is not. It is the assumption of risk, but it is not a guarantee that you will lose like in Vegas.

So the proper question to ask when it comes to trading isn’t -- are you gambling or not? -- but rather are you able to successfully manage the risk of the market or not. To put it bluntly if you suck and are losing all your money you are probably gambling in the worst sense of the word -- i.e. guessing wildly without any understanding of the probabilities involved. If on the other hand you seeing steady and consistent success -- you may be actually skillful.

The key to understanding if you are lucky or good rests on the number of tries. This actually makes eminent sense when you bring it back to sports. Anyone can sink a 10 foot putt, but do it 1000 times and I guarantee you that Jordan Spieth and Jason Day will beat you every time. The general rule in life that separates luck and skill is the ability to replicate success over a large
sample size.

Although statisticians will tell you that 100-200 samples is usually good enough, when it comes to trading I think you need at least 1000 trades to have some degree of confidence that what you are doing is more than luck. My latest day trading system for example has done 769 trades made 8.28% with a drawdown of 3%. All pretty good stats, but hardly enough to make me want to put it on auto pilot and retire to Florida. In fact I don’t think I will ever do that because as I said earlier markets are open ended probability systems that require constant adjustment which means I’ll probably be tweaking my strategies til the day I die.

So am I gambling when I am trading?
I am WORKING on my ideas every single day -- just like everybody else

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Bernie Sanders is the new Ronald Reagan and Why Traders Should Care

Boris Schlossberg

Those of you old enough to remember, I want you to go back with me to the late 1970’s. The country was much more liberal then. Abortion was basically on demand. Environmental regulations weren’t just issued but were welcomed as a necessity and there was even talk of passing the Equal Rights Amendment for women. Oh and the NRA actually believed in responsible, restrictive gun ownership that required training and certification.

Along came a man who everyone said was too old -- way too conservative -- and whose ideas were far out of the mainstream. Also he was genial, charming and never said a bad word about his opponents.

Remind you of anyone? Of course. Bernie Sanders is the new Ronald Reagan and before you blow your red state gasket on my blasphemy, allow me to explain. Of course politically Sanders is the exact opposite of Reagan on almost every issue with perhaps the exception of immigration and guns but as a politician Sanders is the best reincarnation of St. Ronnie that I have seen in a very long time.

There is a reason why Reagan was able to get life long Democrats to pull the lever for the elephant and why Sanders in turn is able to draw massive enthusiastic crowds in the reddest of red states. Both politicians understood the power and discipline of a simple message. Reagan promised to cut your taxes and make America grow. Sanders promises universal healthcare, free secondary education and a $15 minimum wage that would allow workers to earn enough money to pay for food and shelter.

But here is what make both politicians unique and so successful. They don’t focus on anything else. Reagan and Sanders are both highly skilled and disciplined politicians who never waver in their message. No name calling of their opponents. No poll tested flavor of the day soundbites. Not even a moment’s thought to their appearance. Reagan -- the studio actor -- was perfectly comfortable in his all American suits and neatly cut jet black dyed hair. Sanders on the other hand has never met a rumpled shirt he didn’t like and a comb passes through his hair less frequently than through my daughter’s kinky curls. Reagan never tried to be a policy intellectual and Sanders never tries to be a debonair politician. Both men were supremely comfortable with themselves.

Which finally brings me to trading. You have a system. It works generally well. You follow its rules and more days than not it rewards you with a profit. So what do you do? Everything in your power to change it. Oh look one day it cost me 300 pips! I can’t possibly trade that again!

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There is no greater sabotage in the market than self sabotage. And I along with everyone else am very guilty of that sin. The markets are constantly changing, so of course we feel that we need to change with them. But do we? Ultimately there are really only two ways to trade -- momentum or mean reversion. Every single strategy is simply a variation of those two ideas. Instead of looking for the latest and the greatest indicator that would help us to never-ever-ever-ever-lose-again we should should stick to and refine what’s working.

If there is anything that Ronald Reagan and Bernie Sanders have taught us it’s that simplicity works and that perhaps the greatest challenge to success is remembering to do the same thing day and day out.

The Worst Trading Habit That Makes You The Most Money

Boris Schlossberg

Ever since I first picked up a trading book -- more years ago than I care to admit -- the one undying advice of conventional wisdom was “Let your profits run and cut your losses short.” I would venture to say that this “kernel of brilliance” is responsible for more losses than any other trading tenet ever devised.

In actual markets there is absolutely no way to let your profits run while cutting your losses short. You either cut your profits or cut your losses, but you can’t have it both ways. That’s because markets -- and especially speculative markets like forex -- almost never move in one direction.

Anyone who has ever been able to “let his profits run” is simply a lucky idiot who like a befuddled lottery winner guessing a random number, just happened to catch that one big breakout and then was stupid enough to believe that it would continue without retrace and then was lucky enough to have that once in decade occurrence actually happen and lastly -- and this almost NEVER happens -- was smart enough to exit before the whole trade went right back to where it started from.

Don’t believe me? Go ahead keep making bets with 3 to 1 4 to 1 5 to 1 payouts and we can talk again when your account equity is down to 10%.

Now “professional gurus” would be horrified at my blasphemy. They would tell you that one of the worst things you can do as a trader is to cut your profits short. After all, how are you supposed to pay for all those stops?

The problem with professional gurus however is that they are great at trading the left side of the chart.They are awesome at picking prime examples of trends AFTER they take place, but I have yet to see any of them succeed in my domain -- at the right side of the chart where fear and uncertainty control every tick and real capital is won or lost on your tactics rather than your theories.

In that world -- the real day trading world of the markets -- taking your wins too quickly is one of the most profitable things you can do.


Because successful day trading is not about making money. It’s about NOT LOSING money. There are three basic classes of day trades. There are trades that make money right away -- anywhere between 1 and 30 minutes in duration. There are trades that lose money right away usually in the same short period of time. There nothing much to do about either one of those types of trades and you just take them as they come.

There is however a broad middle ground of trades that appear to be uncertain as to whether they want to be winners or losers and this is where all the bad habits of impatience actually pay off big.

Now as traders whether we are Hindus in New Delhi, a Jews in Tel Aviv, a Moslems in Dubai, Chinese in Singapore or just jolly old rogers in Melbourne -- we are in fact all Anglo Saxon at the core. What I mean is that if we live in the advanced industrialized world we have all internalized the Protestant work ethic and with it the core belief that we must sacrifice in order to succeed.

Generally that’s a great rule to live by -- except when it comes to day trading. Good things do NOT come to those who wait. We must not endure pain in order to make profit. The speculative markets flip all those long ingrained behaviors on the head.

You got out of the trade a bit early and gave up 10 more pips of upside? Who cares. There is another trade right around the corner. In the meantime, you know what you also did? You got out of trade that could have turned sour and made a 5 pips instead of losing 100. You know what you also did? You freed your capital to look for other opportunities instead sitting in front of the screen paralyzed like a deer in headlights, hoping -- nay praying -- that you can get back to even while other traders are banking profits elsewhere.

The most important thing that you did was NOT invest. Not invest your time. Not invest your money. Not invest your psychological capital. By selling too early you became a true day trader rather than a quasi investor.

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So go ahead -- get out too early. Give up the profits. Once you start doing that on a regular basis the only thing you’ll regret is not picking up this bad habit earlier.

How Yogi Berra Taught Me to Win 95% of the Time

Boris Schlossberg

In my day trading room we try to hit 95% of our trades. We do this because I am firm believer in the insurance model of day trading (lots of small wins with a few large losses) rather than the lottery model of day trading (a few large wins and many small losses). Lotteries are for suckers while insurance companies are some of the best businesses in the world. I have discussed this subject many times in prior columns, but today I can across another reason why my model is working our chat room.

I was reading a summary of Brett Steenbarger book on Trading Psychology on Ivanhoff’s Capital webpage when I came across this tidbit

“A small win is a small mirror. It reflects a winning image to us. Accumulate enough small wins and that winning image starts to become familiar. We internalize that which we experience repeatedly. That’s one of the reasons positive emotional experience is important….People I’ve known who are particularly adaptive have made small wins a habit pattern. They undertake many new challenges and regularly define meaningful, doable goals. They set themselves up for success. Positivity becomes a habit, a lifestyle, making the whole issue of discipline moot.”

Without really appreciating its power, I hadn’t realized just how valuable the idea of frequent wins is to overall success of the trader. I have seen with my own eyes as more and more traders in my room start to put together profitable runs of days, weeks and even months. In the world of retail trading this an exceedingly rare occurrence and I don’t think it’s due only to efficacy of my strategy but rather to the fact that positive experience creates good habits that leads to better performance.

Which brings me to Yogi Berra. He died this week and it is true testament to the kind of man he was that his death managed to stand toe to toe in headlines with Pope Francis’s visit President Xi’s White House arrival. Berra was not just a great athlete but a great philosopher. His sometimes unintended witticisms are far more quotable than anything uttered by Jean Paul Sartre (and I would argue more insightful as well).

Berra is famous for saying, “You can observe a lot just by watching.” Which is a lesson that I live by every day. Whenever people ask me why I don’t back test my strategies I always think about that Yogi Berra quote and laugh. Markets like any man made social constructs are fluid and ever changing. Back testing data is like trying to figure out social habits of Millennials by studying the Victorians. It’s why every perfectly backtested system, whether it be done on your MT4 package or by Andrew Lo of MIT, always fails. Its why if want to succeed in day trading you watch what is happening now. As Mr. Berra used to say, “In theory there is no difference between theory and practice. In practice there is.”

Upon his death many analysts have re-examined Berra astounding athletic achievements. And as fivethirtyeight has pointed out what’s absolutely remarkable about Berra is that no one with his slugging percentage has struck out less. Berra only struck out 5% of the time and he was notorious for being a bad ball hitter. That means that instead of waiting for a perfect pitch he took what the pitchers threw and tried to make contact. And any time you make contact in baseball you have a chance to score.

This is perhaps Berra greatest legacy and his most valuable lesson to us as traders. Instead of looking for the perfect set up or the absolute best execution, we should try to figure out how to turn every trade into whatever win, scratch or small loss that we can. Berra collected 10 World Series titles by never trying to be perfect but by winning by any means necessary.

5 Principles That Turbocharged My Trading

Boris Schlossberg

Over the last few months of summer I have been daytrading particularly, registering only 2 losing days over the past 40. (This sentence will no doubt now curse me) But at the risk of tempting fate I thought I would put to paper 5 things that I have been doing differently that I believe made all the difference.

  1. Pare your focus. As I mentioned in my earlier columns I only trade 6 currency pairs -- EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD and USD/CAD. In fact I am so focused on those pairs that if you were to ask me the price of a cross -- say GBP/JPY or EUR/GBP for example I genuinely couldn’t tell you. Now that type of myopia may seem extreme to you, but on other hand I know every tick in those pair for the past 5 days running and that give a much better understanding of the price dynamics at play.
  2. Trade your setup only. Over the past year we have developed and refined a very good day trading system. It has proven profitable across more than a thousand trades. But like every bad trader I used to like to freestyle. Instead of sticking to the setup I would take a punt on news trade or just put on a position out of boredom. No more. The only creativity I allow myself is within the constraints of the setup. If the trade does not fit into the parameters I don’t take it.
  3. Chop it up. Trading, and especially day trading is a probabilistic enterprise. There is NO good price -- only a set of reasonable prices for entry and exit. So dividing your entry and exit in at least 3 different orders will increase your chances of success markedly.
  4. Strategy is good, but context is everything. Never, ever be a slave to your strategy. Strategy is simply a structure through which you trade, but you have to know when to use it and when to stand down. The most obvious example of that is not running your EA in front of news-but there are many more subtle clues that you have to take from the market to truly refine your trading. That’s why no automated system has ever made money over the long term. As one of my traders said, it’s market’s job to get you into bad trades and out of good ones, and it’s your job to avoid the bad trades as much as possible.

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Last, but most definitely not least the one rule that has truly made me the most money is -- EYES ON THE SCREEN. If you are day trading and decide to casually leave your positions be you might as well kiss your money goodbye. That’s why now, when I have to leave the office for more than 20 minutes, I close every trade and go flat. I even created a little ditty so I won’t forget -- If your eyes are not on the screen -- you won’t see green.