The Holy Grail of Trading

What is the Holy Grail of Trading?

Is it that one strategy that never loses?

Is it that one Indicator that never fails?

OK, OK, we know (hopefully) these don't exist.

Maybe its the way Warren Buffet invests in companies? He is one of the most successful investors in world, so he obviously knows what he doing.

Maybe its the way George Soros fearlessly trades the FOREX market?

Maybe its the way Bill Ackman of Pershing Capital astutely navigated this historic bear market?

Maybe its the way Jim Simmons works with his team of 50+ PhD's at Renaissance Technologies to scientifically model and trade the global capital markets?

At least we know its not the disgraceful and treacherous way Bernie Madoff went about his business, to the ruin of all those that trusted him.

So if its the way Buffet or Soros or Ackman or Simmons trade, then why don't we just hire them to manage our money?

Well, if you are reading this, then perhaps it never occurred to you to have someone else manage your money. Or maybe we let some hedge fund guy or mutual fun gal do it for us, and they didn't perform up to their benchmark or our expectations?

But ultimately, I say its because we want to trade the market ourselves and have a crazy notion that we can do it as well if not better than these trading masters.

So if we are going to do it ourselves, we better have an edge, a plan so to speak. And we have to be able to execute this plan. If we don't then the capital markets of this world will eat us, eat us alive.

I suggest the key, the Holy Grail of trading, is to have a trading plan that fits our personality. In the end, if we are the ones that are going to push the buy and the sell buttons, then these actions must be derived from our own cognitive analysis of market behavior and then supported by our emotional intelligence of our internal process.

Yesterday, JE wrote in a very personal manner, about the struggle to find a trading strategy that fits his personality (http://myestradingjournal.blogspot.com/2009/06/off-hours-two-year-anniversary.html). In my view, developing a trading plan that fits our personality is the key to trading survival, success and ultimately mastery. For me, 13 years into this game, it continues to be a work in progress.

Here is a copy of my response to him:

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JE, great post and follow up comments...

i strongly agree that the key to trading the markets, the holy grail so to speak, is to have a trading plan that fits the trader's personality...

there are hundreds of trading strategies available fully detailed in books, magazines, online, etc...if all we had to do was pick one and trade it, we would all be millionaires in due time...however nearly all of us fellow traders are not...

why?

i think the key is whether or not we can psychologically/emotionally trade the plan....

can we take the trade when the signal is given?

can we exit at the defined profit target?

can we take the stop loss?

can we withstand the periodic drawdown?

can we sleep at night?

can we recognize our fear, our anxiety, our greed when the position is on, and still trade the plan, even if it means continuing to feel these emotions?

can we deal with the uncertainty of an unknown outcome?

i pose these questions because i believe they are essential emotional/psychological markers of our ability to be truly successful traders...

to achieve trading mastery, we have to answer 'YES' to each question...

currently, this is the center of my work as a trader, and it's a bitch...

adam

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