Home > management, Markets, trading > Profitable ETF Trading Strategies: on having courage

Profitable ETF Trading Strategies: on having courage


There are many traders who advise you to have the courage of your convictions. They will describe situations in which they were experiencing maximum pain but found the courage and fortitude to hold on and stay with the position and were handsomely rewarded for doing so. They may even have some impressive charts to support their assertion. 

I do not doubt that you can get some extraordinary moves after moments of extreme pessimism and panic selling. In fact, that turns out to be a very powerful strategy to employ in many different market conditions. 

I just don’t think that it is necessary to have to suffer all of the pain on the way down in order to participate in the joy of the massive overreaction back towards fair value when the market reverses. 

I find the language of heroism and courage to be appropriate for the discussion of mythic literature and popular action movies. I don’t think it is necessary to frame your trading in that light.  I believe it puts you into positions where you are experiencing extremes of emotion at crucial decision points.  I think that this places unnecessary stress on you. 

We are prepared to reenter quickly with no worries when the following conditions are true:

1.       If we have a profit in hand,

2.        and we truly believe that the market is filled with an infinite amount of future opportunities,

3.        and we are prepared to observe the actual behavior of price in the moment,

4.        and we can set aside our ego and emotions,

5.        and the cost of reentry is low,

6.        and we have trained ourselves to quickly read frame a trade for reward to risk ratios,

7.       and we can actually frame a low risk trades in the moment. 

Because the original trade met our strict requirements for entry, it may be possible to relax some of the constraints for reentry. This is especially true if the original trade was a win, because now we have evidence that our original idea had merit. It makes it easier to see the reentry is a continuation trade. 

By having trust and confidence in our reentry strategy, we can actually afford to be wrong more often on the original exit that preserve the profit or took only a partial loss. 

If we can truly check our egos at the door, and we can learn to laugh at our nervous behavior which locked in a profit too soon and set us up to have to reenter a position that is resuming its strength, then we are in a position to capture much more of the opportunity at a very low risk. We will be making multiple decisions in calm mental states routinely. 

In my mind this is much more likely to produce a state of satisfaction and niece when trading. This is a decided advantage to a short-term trader that can master this approach. 

I would much rather be a more frequent trader, who captures partial pieces of an excellent move in a low risk, low stress manner then the solitary hero who wins the dramatic battle at the end of the movie. 

 In real life, sometimes the bad guys win. I do not want it to be at my expense.

  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: