Last weekend we held one of our regular coaching calls with the Breakout Strategies Masterclass, and breakout trading specialist Tomas Nesnidal made an interesting point that I wanted to share with you today.
It’s a danger that can lure traders in, both beginner and experienced, delaying our trading goals. That danger is:
Traders often spend too much time focusing on things that aren’t really that important.
- How can I increase the win % to be right more often than wrong?
- How can I make a trading strategy absolutely perfect?
- Which indicators should I use to reduce drawdown?
- What screen size do I need to draw accurate Gann Lines?
- And the list could go on and on…
But as Tomas shared, based on his experience working with hundreds of traders, one of the main reasons traders spend way too much time with these types of questions, is due to a lack of understanding of the fundamental but very simple math behind profitable trading.
Traders can get so preoccupied with things that might seem crucial, but they’re not really that important to achieving the ultimate goal.
Using a simple spreadsheet Tomas showed us the math behind successful Breakout Trading, and how “a lack of understanding of the very fundamental and simple math behind profitable trading” was holding traders back.
Things like Risk to Reward Ratio, Expectancy, Opportunity, Risk of Ruin and even basic portfolio construction.
Essentially, being profitable in trading doesn’t have to be complicated.
Of course, you still need robust and good quality trading strategies (which we teach in the Breakout Strategies Masterclass).
But they do NOT need to be perfect.
Far from it.
Perfection is a common theme amongst traders, but it can be a very dangerous lure because it’s something that keeps postponing the real goal, the real objective of trading, so think about this…
Do you want to be perfect, or do you want to make money?
If you want perfection, you could spend your entire life perfecting things, but never make any real money trading. There are plenty of “traders” who have been down that path.
Strategies don’t need to be perfect if they have the fundamentals on their side, so stop trying to “perfect a system” and just get on with it.
Keep moving forward.
As Mark Twain said: “Continuous improvement is better than delayed perfection.”
9 May 2018