Stocks. Options. Futures.

Lessons Learned

35 lessons from trading my own money since 2018, newest first. Each one links to the post it came from.

2024

  1. Shorting stocks as part of risk management

    Shorting weaker baskets during over-extended rallies can offset long exposure and smooth the overall equity curve.

  2. Backtesting can’t be used to forecast the future

    Backtests only validate an idea's statistical significance on past data; they cannot predict the future or create strategies.

  3. Everything between the entry and exit is unimportant

    Once risk, stop and target are set, volatility during a trade doesn't matter; let the edge play out.

  4. Good performance comes from not knowing

    Nobody knows the market's next move; risk premium lies in uncertainty, not in crowded consensus trades.

2023

  1. There’s more to life than trading

    Trading shouldn't become an obsession; a balanced life with relationships, health and experiences matters more.

  2. Price makes news, not the other way around

    People link price moves to news after the fact; I manage money by price and tune out the noise.

  3. Drawdowns are like scars showing that we have survived

    Drawdowns are an inevitable part of taking risk; surviving them within expected ranges is nothing to regret.

2022

  1. Placing trades should be boring

    Consistently following the trading plan with small losses should feel boring, like a business, not a gamble.

  2. The house edge

    Like a casino, a modest edge with higher trade frequency and limited bet size can outperform.

  3. Technicals often precede fundamentals

    Price trends often turned down before bad earnings, so I avoid holding downtrends into earnings announcements.

  4. In the markets you don’t make it happen, you let it happen

    You cannot control the market short-term; profits are the result of a good process, so let it happen.

  5. I’m attacking the risk, not trying to avoid it

    Risk cannot be avoided for excess returns; diversify across markets, timeframes and directions, and size positions carefully.

  6. Comparison makes market participants unhappy

    Comparing returns to others breeds performance chasing; focus on your own absolute performance and process.

2021

  1. Be bold with your profits

    Taking small profits early is a loser's game; tolerate risk on open profits, but cut losses quickly.

  2. I don’t pick stocks, the stocks pick me

    I pick no stocks by fundamentals; predefined rules on price trend, swing or momentum surface the candidates.

  3. Every trading strategy has drawdowns

    Accounts are in drawdown most of the time; know your strategy's expected distribution and stick with it.

  4. Trading into earnings is a crapshoot

    Earnings reactions are random for a technical trader; I exit swings beforehand, letting only wide-stop trend trades through.

  5. All stocks are bad unless they go up in price

    I buy stocks going up and sell when they fall, keeping losses small so winners do the work.

  6. How to beat the S&P 500 index with market timing

    A simple monthly 200-day moving-average rule beat S&P 500 buy-and-hold since 2000 with far smaller drawdowns.

  7. A bubble is a bull market you are not participating in

    Knowing your system's expectancy and risk of ruin lets you ride trends through drawdowns rather than fear bubbles.

2020

  1. I don’t take profits and losses, I exit

    Exits follow rules, not P&L; losses are business costs, unlike amateurs who cut winners and hold losers.

  2. Good trading ideas often turn out to be bad when backtested

    Backtesting shows sitting out for perfect setups misses moves; frequent modest edges can beat rare high-profit-factor signals.

  3. It is OK to be wrong, it is not OK to stay wrong

    Decide exits before entry and take the loss when wrong; losses are to be managed, not avoided.

  4. It is not thinking that makes big money in stock market

    Big money came from sitting with winning positions and cutting losers, not from predicting news or media narratives.

  5. The data for any decision is infinite

    Endless reasons exist for any market direction; follow system signals and manage risk instead of predicting.

  6. The best loser is the long-term winner

    Trading means learning to lose small; following rules to preserve capital keeps you in the game.

  7. Focus on process, not results

    Market outcomes are random; follow your trading plan and judge the process rather than individual results.

2019

  1. Trading is not easy, but it’s simple

    Trading methods can be simple; the hard part is discipline to stick to the plan without emotion.

  2. Amateurs want to be right, pros want to make money

    Pros take small losses when wrong and honor stop orders; they aim to make money, not be right.

  3. Treat trading like a business

    Treat trading as a long-term business: follow rules, don't rush, let setups come, document and review trades.

  4. Live to fight another day

    Take small losses to preserve capital so you can make big profits when the right time comes.

2018

  1. Never throw good money after bad

    Without a defined exit plan I averaged down; technicians shouldn't add to losing positions, buy stocks rising.

  2. Cut losses quickly, let profits run

    Respect your plan's profit targets, and exit losing trades quickly; re-entry is only a commission away.

  3. Always use the same risk size

    An oversized position caused emotional stress and lost sleep; keeping a consistent risk size avoids that.

  4. Trade your system, not the news

    Trading around news and headlines led to losses; follow your system and read supply and demand from charts.