The tyson manifesto
Trading is a game of doing what's necessary to be profitable.
Unfortunately, this includes taking losses. The rate of loss-taking that is necessary is in opposition to what a typical human brain can handle before releasing the emotional response that makes trading impossible for most.
The answer is to systematize the taking of losses. Whether that be through the manual application of a framework or by fully automating the process. Ultimately, trading successfully is a game of systematic loss-taking.
Most traders aiming to maintain a high win rate are merely exhibiting a defensive behavioral response to the risk they are taking, which leads to the very outcomes they are trying to avoid. The reality is there's a correlation between low returns and a high success rate when measured by individual trades. With the highest return strategies over time, the expected percentage of profitable trades should be around 20%, with the remaining 80% being stopped out for a small loss as quickly as possible to free up capital for the next potential successful trade.
Taking an approach in this manner is extremely hard for humans to apply. Moreover, many of the trades that are stopped out continue in the desired direction, which adds more frustration for the trader. Here lies another reason why what's necessary to be profitable is nearly impossible for the typical human to accept.
All these factors induce a fear of regret and often lead the trader to make the easier decision to buy and hold, accepting a sub-optimal method that is not under the control of the trader but at the mercy of broader market movements. If this describes you, and you have suffered losses due to this way of thinking, maybe it's time for a change—a change that utilizes a proven framework that's more sophisticated than what 95% of market participants choose to do.
tyson - Systematic Trading Accomplished
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