Edge: You Can’t Trade Too Much

When Trading Often- Means You’re Trading Well…

Most of us hear the wisdom “be disciplined…”

It’s usually spit out from a burnt out trader trying to salvage the last $1,000 in their account. Today we discuss why it’s bad advice, or I should say, it’s misinterpreted advice.

In today’s podcast we reveal why trading more, and how to properly trade more, actually moves you closer to profitability, faster. Your goal is to validate your strategy, then trade the hell out of it.

The problem for most of us, at the beginning, is we don’t make the distinction between trading “everything” versus only taking trades that match our strategy. The problem with the second scenario is most traders don’t have a strategy, so let’s make that step #1. Develop a strategy to test.

What Does Trading Discipline Mean?

Being disciplined and following your plan does not mean that you should be trading less, it means that you should only be trading ideas that match your strategy. It actually means that you should execute every trade within the context of your edge.

For arguments sake let’s say I am trading five popular stocks and each of them match my criteria to be long and let’s say now the market opens.

Let’s say the criteria is at 9:40 am, whichever stocks are above the opening price and net positive I am immediately buying with a stop loss at today’s low. That is a rather simple strategy but the point I want to make is that if all five stocks trigger and match your strategy, you should buy all five.

I can’t explain that more clearly…

Trading Too Much versus Flawlessly Trading Your Strategy

Let’s take out of the equation how much buying power or capital you have allocated to your trading account. That is not the point of this lesson, we are talking about the global probabilities of allowing your edge to play out over time, over as many good trades as possible and as fast as possible.

I can see how that word fast implies over-trading but here is the key point- it’s not over-trading if every trade matches your strategy.

That is the point, that is exactly what most traders never learn.

Too many traders mistakenly believe if they take every trade that matches their strategy, that they’re over trading, I am telling you that is not the case.

It's the definition of discipline and allowing your edge to do the work.

Pete