The next interview in the series is with Fred, the Lone Stock Trader. Fred trades for a living and posts about it on his web site. He’s written several excellent articles on his system and trading in general that are worth reading. His 2019 review is particularly good as well as his post about how he transitioned from failed business to profitable trader. I love the no-nonsense style of his writing and his openness about his trading. I’m really happy to post his responses here.
What is the most overrated trading advice?
The most overrated trading advice is “get out when you’re wrong”. But don’t get me wrong (pun intended). The advice is sound.
I consider it overrated, because it reinforces the perspective that losing money on a trade means you were wrong, which is a wrong association in my opinion. If you’re following a trading strategy, losses are just part of the normal distribution of the strategy. The result of one trade is random. The result of one hundred trades is less random. Thinking that a loss (or ending the day/week/month in the red) automatically means you’ve done something wrong shows that you haven’t accepted the probabilistic nature of trading, and that you’re on the dead-end path of trying to win (“be right”) all the time, which often is at the root cause of why so many traders end up blowing their account.
What is the most underrated trading advice?
“Review your past trades”.
It’s something most traders know they should be doing. Yet I’m pretty sure very few actually do it. That’s the single exercise that turned my trading around years ago. I discovered my strengths, my weaknesses, and that if I had followed my strategy perfectly, I would have made money instead of losing consistently. The whole game then shifted from me trying to make money on every trade, to me focusing on following/executing my strategy perfectly. That’s when I started making money. That’s when I genuinely accepted that trading was probability game.
What’s a non-trading related book that’s influenced you recently?
It might sound cliche, but “Atomic Habits” by James Clear had a huge impact on my life. Motivation and discipline only lasts so long. Be it saving money, losing weight, being a successful trader, running a marathon or nurturing a healthy relationship, it’s not your discipline/motivation that will allow you to reach these goals. It’s your habits. This book explains and gives examples of how to form good habits and get rid of the bad ones.
Questions for Fred?
Ask him in the comments below or ask him on Twitter. Thanks Fred!
Do you know someone who you think would make a good interviewee? Contact me!