My Trading Style and Philosophy

If you've either followed this blog since day 1 (you poor soul) or if you've just scanned through the trades here and there, I'm certain you noticed that overall my trading style seems to be schizophrenic at best.

You are completely correct, however it's been that way since I first started trading. I learned many different styles of trading and it's taken a VERY LONG time to determine my overall trading style and philosophy.

But, I've come into some MAJOR REVELATIONS over the past six months or so. First of all, I believe that the high/low system that I trade is a gift from GOD. If you don't believe in GOD, then I'm sorry - but you're wrong, as there most definitely is a GOD and he wants us to be blessed.

Secondly, I needed something to go with my high/low system that would work "in between" my high/low entries. This second style of trading can be called "flags" or "pullback" trading.

So, I got my trading systems finally in order. At some point in this blog I will expand on each system. However, if you pay close attention, you should be able to understand most of each system before I explain them.

But what I really want to harp on right now is the BIGGEST SECRET TO TRADING SUCCESS OR FAILURE: YOUR MENTAL STATE!!

What's your mental state for the pictures below? I.e. - what do you see??

I just got done reading an e-book titled "Trading In The Zone" by Mark Douglas. I WISH I READ THIS BOOK BEFORE I EVEN STARTED LEARNING ABOUT TRADING.

By and large, this is the absolute best book I have read about trading. It does NOT teach you how to trade - there are plenty of places elsewhere to go for that. What it DOES DO is teach you how to get your mind right, just like this guy was trying to do in the movie:

Anyway, here's the bottom line of the book - you WILL NEVER know what direction the market, and your trade, is going to go. Only GOD Himself knows that. You may THINK you know, but you don't.

Since you don't know for ABSOLUTE CERTAIN which way the market, and your trade, is going to go, then the best thing you can do is trade with an edge. "An edge" is your specific trading system (like the one I'll explain here at some later point in time). Once you have an edge, then you know that over time, your edge will give you profit. You MAY NOT PROFIT on every single trade. You SHOULD EXPECT losses. However, over time and with lots of trading, your edge will continue to steadily put profit into your trading account and that account should be growing CONSISTENTLY.

So, when you trade, just remember these things:

1. You don't know where the price is going to go

2. You may profit or you may lose money on any trade

3. In the long run, with many trades, you'll have net profit

4. Don't worry about "being right"

5. Take every trade you can that meets your system's rules

6. Don't get emotional, either way, on the outcome of any trade

This may sound a bit odd, but experienced traders reading this know what I'm talking about. As humans, we want to "be right". However, as we try to "be right" we get hurt emotionally and financially when things don't go our way and this leaves mental trading scars which hinders us in the long run. We have to quit trying to be right and instead focus on following our system (that has an edge) and look to consistently making profit in the long run.

Think about any casino. Sometimes their edge is really small. For example, sometimes you can find slot machines that payout 97% of what they bring in. This means that the casino's edge is only 3%. However, think about the volume of money that goes through one of these machines. It must be THOUSANDS of dollars a day if not more - and that's just ONE machine. No wonder Las Vegas can offer such cheap hotels, food, entertainment and comp you when you are playing - they are making their money in the long run. They want people to stay at those machines because in the long run they win with their edge.

Put in the opposite view - if you ran $100 through that same machine, then statistically, you'll come out with $97. Not bad, but you still lost $3. Yes, some people hit jackpots on their first pull of the slot machine, but you don't know how many people before and after will go away losing massive money to those same 97% machines. It's all about the long term.

And that's the way you need to think as a trader - long term trading with an edge.