Your Top Priority: Execution
4 steps from Tom Dante to improve your execution, plus wisdom from JUNO
Audio available at the end of this post.
Finding a profitable strategy isn’t hard.
Pick up a good book. Watch high-quality YouTube videos. Scour the web for reliable information.
Whatever your preferred source, the point stands — profitable strategies and systems are no secret.
So, why do so few traders make money?
The edge is in you
Tom Dante makes very clear how the trader — and not the system — is the edge.
This became apparent to him in his prop trading days. All prop traders receive the same training and tools, yet few turn consistently profitable. Fewer still become truly ‘big’ traders.
Furthermore, profitable traders can trade totally different strategies. Tom gave as an example the two biggest traders within a prop firm he worked for: one traded the news; the other deliberately ignored the news, focusing on price alone.
In other words, within the same firm, the two biggest traders — both a cut above everyone else — had polarised approaches.
As another example, Paul Tudor Jones made most of his money by catching tops and bottoms. Whereas momentum traders like David Ryan and Mark Minervini find it much easier to concentrate on the ‘meat’ of the move.
As Minervini often says: there are many ways to ‘skin the cat’.
However, successful traders do share certain traits. You have to be ‘wired’ a certain way to make it as a trader. As Tom likes to say: the edge is in you.
The problem: execution
In the above video (and elsewhere), Tom points out that he encounters many traders who struggle to execute their edge — not to find one. That’s independent of what the edge actually is.
Again: finding an edge isn’t hard to do — just shamelessly copy a setup that worked for someone else. Over time, you’ll develop your own style, making tweaks as you go along. Imitate before you innovate.
But the challenge is execution. Unless you execute that edge well — across many years — you’re not going to make any money.
I highly recommend watching the above video. Tom’s blend of blunt truths and storytelling is one of a kind — highly educational and entertaining.
But to summarise his four steps addressed in the video, which you can immediately implement to improve your execution:
Don’t take any trades outside your edge
Step up when you do see your edge
Trade the market, not your P&L
Learn from your mistakes
Let’s delve into each. I’ll blend Tom’s advice with insights from other traders and my own observations.
1. Don’t take any trades outside your edge
In short, if you don’t see your edge, don’t trade. ‘Sit-out power’, as Minervini puts it.
So, why would someone trade if they don’t see their edge?
Usually, it boils down to impatience.
Why might someone be impatient?
Part of it may be not knowing your edge well enough. If you’re not clear on your edge, the market will be constantly ‘advertising’ to you. Everything that vaguely looks like a setup will seem like a potential opportunity.
If that’s you, you need to work on your edge. Do a deep dive. Review your journal. Figure out what you’re looking for, and where and when you want to see it.
Confidence and professionalism as a trader can only come by forming your opinions based around your own hard work.
And the more confident you are in your knowledge and strategy, the easier it’ll be to stay out of trades. Because you know that you don’t have an edge.
Another problem might be around discipline
You know that you’re looking at a three-star setup (or worse), but are trading it anyway.
If that’s you, again, the question to ask is why.
Is it because you treat trading as entertainment, rather than a business? As Tom would say: ‘Start acting like a f**king professional.’
Though I’m not foul-mouthed, and prefer actionable advice, Tom has a point.
You wouldn’t behave that way in your 9–5. And trading is way harder than most day jobs.
Act accordingly.
Routine
I’ve become much more disciplined over the past year than I used to be. A part of it is because I want to be a professional. More than that, I’m looking to master my field. That’s part of what drives me.
The other part is routine. Every day, I know what hours I’m writing for myself, what hours I’m writing for my employer, what hours I’m watching the markets, and what hours I’m planning the next session.
I also know that, come Saturday morning, I need to have a stack ready to go.
Because I hold myself to that schedule, discipline becomes much easier. In fact, I find satisfaction in doing the hard stuff consistently.
Having a weekly and daily routine helped me with discipline. Maybe it’ll help you too.
2. Step up when you do see your edge
When you do see your edge, you need to execute — no second-guessing yourself.
This requires confidence.
Confidence in yourself, and confidence in your process.
This is hard if you aren’t getting the results you want (yet). But you must acquire it, or you’ll never become profitable.
Even if you are profitable, losing streaks are inevitable. Not to mention uncomfortable.
‘What if my next trade is a loser too?’
You can’t think that way. You have to stick to your process. You have to trust your process.
Again, that confidence comes from studying.
But as Jeff Sun says:
Forget about the money
Tom (wisely) points out that a common root cause to being scared of losing is that people are focused on the money, when they should focus on the process. They go into every trade with expectations that are too high.
Instead, you need to go into every trade simply ‘playing your hand’, in the knowledge that there’ll be more trades after this one.
To help with this, Tom suggests visualisation. Specifically, negative visualisation.
When he himself felt dejected after a few consecutive losers, rather than anxiously anticipate the next trade, which may or may not break the losing cycle, he visualised pulling the trigger, getting stopped out and seeing the loss in his account.
As he put it: “You make peace with it, and then you take the trade.”
Tom explains this as “diminishing the fear”, so you’re reducing the mental impact of being wrong.
Whether or not this technique works for you, you need a level of emotional detachment when you trade. Good trading is boring. Just trade your strategy, collect data, analyse it, and incorporate improvements.
Rinse, repeat.
3. Trade the market, not your P&L
The market doesn’t care about you.
It doesn’t care that:
You need a stock to move up 5% for you to break even;
You could’ve sold the stock yesterday 10% higher;
You’re not on your average profit yet; or
You’ve got bills to pay.
The market is simply reflecting supply and demand. It goes where it will.
Question is: are you listening to the market? Or are you driven by your own needs?
Post-publication clarification: This is different to using portfolio performance as a gauge for determining aggression. It’s the difference between:
‘None of my buys have been working lately — maybe the market is trying to tell me something’; and
‘The stock hasn’t gone up enough from my buy point — I can’t sell yet’. That’s as maybe, but is it acting like it can go higher, or has your original thesis for buying the stock changed?
I’ve also modified the original list above for clarity.
4. Learn from your mistakes
This one’s important, regardless of field. As Albert Einstein said:
“The definition of insanity is doing the same thing over and over again, but expecting different results.”
How many traders fall into precisely that trap? The infamous ‘this time it’s different’?
To be clear: there’s no shame in making a mistake. For that matter, there’s no shame in being in a losing streak.
But learn something from it.
I’ve done a four-part series on how to crunch your numbers in Excel, and Dave (@DMacTrades) posted about journaling your mental state, so I won’t go into too much detail here.
Just remember that resolving problems requires three steps:
Identify your problem.
Figure out why you have that problem.
Come up with a solution to that problem.
This tweet from Tom sums things up well:
Stockbee takes a similar view:
Again, if you have a problem, you need to figure out why you have it. Then, amend your process such that the bad practice becomes impossible.
For example, if nothing good ever happens after taking two losers in a row on the same day, immediately stop trading for the day! Find something else to do instead — take a walk, cook yourself a decent meal, read a book, etc.
Look after yourself. And come back stronger the next day, having learnt from your mistakes.
If you’re not a relentless problem-solver, you won’t make it as a trader. As Tom always says:
“If you’re not working on your edge, someone else is.”
Everyone can find something they need to improve, whether you’re a beginner or a seasoned professional.
Perfection doesn’t exist in trading. But improvement certainly does.
“I’m not looking for a trade to go to the moon, I want my system to go to the moon”
That’s a JUNO quote from a recent interview I conducted and wrote up for base.report.
It seems like the perfect ending to this stack. Particularly as that conversation, in part, inspired this stack.
Here’s JUNO talking about the importance of consistency:
“I like to go for singles and doubles — I’m not looking for a trade to go to the moon, I want my system to go to the moon. However, I see few traders thinking that way. Most get greedy, looking for that home run.
“I find that the longer I trade, the more appealing consistency becomes.
“I’ve learnt that being in a positive feedback loop is the only thing that prevents me from engaging in destructive self-sabotage. My healthiest relationship with trading is when I can wire money out every month, and my equity curve is smooth.”
And when I asked him how important stock selection is to him, JUNO answered:
“Very. But I don’t see it as a trader’s top priority when you’re looking for consistency.
“To an extent, the right stocks to trade is subjective to each trader’s system. For example, if your system concentrates on large caps, but we’re going through a period where small caps are the ‘broken slot machines’, I can’t fault you for being in a drawdown — you’re picking the ‘right’ stocks for your system, which just happen to not work right now.
“But when you go through these periods — or, for that matter, a strong period — it’s your execution that will determine, over a long period of time, whether your system is going to the moon.
“I’ve seen many different traders, who all trade different things, have very positive long-term performance. They all had one thing in common: consistently executing their system well. Notably, they weren’t all picking the same stocks.
“Even if they were, picking the right stocks isn’t enough. You also have to enter and exit them at the right times, and manage risk well. You have to size up at the right times — you can pick the biggest winners in the market, but if it’s a tiny position, it’s not going to move your account.
“We can land lucky trades here and there, but the long-term metrics don’t lie. And these are determined by proper, consistent execution.”
JUNO also explained how traders can improve their execution, how to review your trades, and much more in the full interview.
But here’s the bottom line — the big point I want to make today:
Even the best strategy in the world won’t help you if you can’t execute it.
Support my work
Found this stack valuable? If you’d like to contribute financially to say thank you, please buy me a coffee.
You can also help out by liking, commenting on and/or sharing this stack. They all help spread the word!
Listen to this stack
More content like this
All my Tom Dante stacks are here.
To explore my full archive, click here.
You probably write the most relevant swing trading articles that I have ever read. Congratulations and thanks.