“You’re closer than you think.
“If you’re not successful, and:
You are working hard; and
You are doing something that’s conceptually correct; and
You are following proper money management; and
You are being clinically dispassionate; and
You are documenting things.
[…]
“[If] you’re doing all these great things, then you might be a lot closer
than you think [to profitability].”
This is the 30-second intro to Dave Landry’s “You’re Closer Than You Think To Becoming A Successful Trader” video:
I really like this short video, as it covers so many practical points in just 8 minutes. However, to keep today’s notes focused, I’m concentrating on the take-away that resonated the most with me, as it reflects my own mistakes.
(Hat tip to AsymTrading for sharing Dave’s video on X/Twitter!)
Reasons you’re being stopped out a lot
If you’re doing all the right things — like those listed at the top — you may only be “one minor tweak away” from profitability.
For example, if you’re getting stopped out a lot, chances are that this is a symptom of one of two problems:
Problem #1: Not being selective enough
Identifying setups is vital to profitable trading, but in itself not enough to ‘get you over the hump’.
As Dave says, you must “pick the best and leave the rest” (0:48).
This goes beyond situational awareness:
For continuation patterns (like breakouts), are you picking stocks that are accelerating in their trends?
Are you picking stocks that are capable of making a significant move? Preferably a clean move, too? As Qullamaggie explained in his 1 December 2023 stream, different stocks have different personalities.
David Ryan’s entire system revolves around making as few decisions as possible.
Qullamaggie keeps saying that, every year, his goal is to trade less.
In short: be selective.
Problem #2: Too tight stops
Dave’s “fixed” many traders by simply getting them to loosen their stop losses.
He explains (1:20):
“The market doesn’t care what your risk is. The market has its own risk
parameters — its own volatility.“So, if you’re looking at something that’s bouncing around three or four points a day, and you’re like: ‘Well, I’m just going to risk a point and see what happens.’ Well, I can all but guarantee you’re going to get stopped out on that noise alone.
“Now, this isn’t to say throw caution to the wind. You want to adjust your share size down accordingly.”
Compare this to what AsymTrading says:
“With trading, there’s trade-offs. […]
“The tighter your stop is, the bigger your position size can be. That is absolutely true.
“But also, the tighter your stop is, the more likely you’re going to get stopped out and you’re not going to be in the position when it finally, actually moves. […]
“You want to be in the position, give it enough room to wiggle around within normal volatility and not choke it off before it even has a chance to […] do what it would normally do.
“So personally, I actually tend to use the pivot lows or the lower Bollinger Band as my reference point — and yes, that certainly puts things a little further away, which means your position size is going to be smaller.”
Also, using wider stops may help with your selectiveness. Even though the account % risk should be the same, you can psychologically trick yourself into feeling that by giving stocks more room, you’re committing yourself more strongly to them, and should therefore pass on anything not meeting your criteria.
At least, that’s what I’ve found.
My own mistakes
I was guilty of these problems. Especially #2.
I avoided >2% stops after crunching my numbers, and discovering that I had zero winners move more than 2% against me before turning into winners. (I’ve discussed this at length here.) This worked well for me for nearly two years.
Probably due to a change in market conditions and changes to my own situation — my day job is more demanding now than it was during the period I analysed — I’ve found myself being stopped out of winners prematurely in recent months.
I’d be a hypocrite to not try and solve my own problems after writing stacks like this.
So, I tried to solve them.
For the most part, I now have slightly wider stops and slightly smaller positions. I’ve had to, as I now rely more on limit and stop orders, due to not watching the market as actively.
And because my stops are now wider, and I’m watching the charts less, I find myself naturally more selective. At the same time, because I take fewer trades, I also find it psychologically easier to give my stocks more room.
Currently, this is getting me better financial results. Plus, I’m feeling much more emotionally detached from my trades, which is helping me stay in winners for longer and generally feel less stressed.
Trading is a journey. So is writing.
Will this change continue to improve my returns? Who knows!
Let’s be clear here: I’m no trading guru. There’s so much I still haven’t figured out, though starting this Substack has been a massive leap forward in my development as a trader, and I encourage anyone to start writing online on a topic that interests you to accelerate your growth.
Some of my early stacks make me wince — in terms of both missed information and the writing itself — which is uncomfortable given that they are, and will remain, public. But that’s also an unmistakable sign of improvement. So, I look forward to wincing at this stack in a few months.
As for my returns, right now, I’m more consistent than I’ve ever been. But I’m not yet where I want to be. A big area I’m working on is being able to really get aggressive when things are working well. Probably a reflection of my overly cautious personality, but that’s no excuse to not address this issue.
The journey continues. The main goal is to keep moving forward.
Next stacks
I’ve watched and rewatched Marios Stamatoudis’s (@stamatoudism on X/Twitter) TraderLion interview, and have not even come close to absorbing all the information.
As I tweeted, I need to take notes on this. The amount and quality of information in here — for free! — is extraordinary.
Writing them up will take time, but I also want to commit to publishing weekly stacks, every Saturday, 10:00 am (GMT).
So, I’m going to publish a series of shorter stacks (like this one) while I continue to work on my Marios notes. These won’t be rushed — I’m determined to give them the time and effort they deserve.
To get all future stacks straight to your inbox, why not subscribe? It’s free!
Thank you again for writing.
I really appreciate your writing, it has helped me out a lot in just a short period of time