Papale on Changing Strategies

Here in the Chicago area we are still celebrating our game 7 win Wednesday night.  Final score in OT:  Blackhawks 2 Redwings 1.  If you are a hockey fan you enjoyed a great game.  Hats off to both teams.  And to my brother who lives in Detroit:  Time to pay up.  10 lbs of Italian Sausage.

Students and traders are always talking about the newest and latest great way to make money.  Every couple months or so it seems someone hears about some system that has performed with stellar results over the last X number of years.  It is tempting to go check it out and jump on board.

However I have found that chasing the latest greatest thing is a losing proposition for most.  First, trading is an inherently risky business.  Unless you are hedger where you are using the financial markets to lower you risk,  you are taking on risk in order to profit.  So expect to lose sometimes.  Of course we all want to keep losses as small as possible.  That is why we have a trading plan and risk management.  But expect losses.  They will come.

Secondly, not every strategy works in every market condition.  Different strategies benefit from different market environments.  Some do well in quiet markets, some in volatile, some trending, some capture pricing differences across different products or time.  Some strategies require small capital and others large technology infrastructure.  Point is there are many ways to profit in trading.  There is no holy grail.  What we need to do is find what works for us based on factors such as time commitment, capital available, risk tolerance, etc.  Then plant your flag so to speak.  Learn the strategy, manage the trade and evaluate performance.  If there is change that needs to be made, make it methodically.  Not to say you can’t trade more than one strategy.  But be leery of the magic strategy.  You will likely be chasing leprechauns.

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