Straight From The Q&A

A number of members found my answer to this specific Q&A of interest so I thought I'd share it with everyone:

Steve asks: Would you be so kind to share your experience on your blog regarding trouble in trading? I have been trading for about 1-1/2 years and recently have been in a rut. I know everyone goes thru these times and most recommend doing intensive review, do you have any suggestions?

Kirk answers: Just like the economy and market, everything goes through cycles, both good, bad, and in the middle. Trading is the same way. You haven't really been trading for long enough to know that it just comes with the territory. Any trader who says they can produce big profits day in day out without experiencing a trading rut is not being honest.

As you say, the first thing that most traders do is try to "fix" their strategy by an intensive review. While it is good to try to make every improvement you can about your approach, I also think there is also a danger commonly overlooked by a lot of traders. That is, they move from one strategy to the next without giving any strategy enough time to fully develop and become successful. I hear from traders all of the time who tell me they've tried dozens of trading strategies but none of them have ever worked. When I ask them how long they've spent with each, they often say just a few weeks or a couple of months. These traders are seeking the holy grail - a simple way of beating the market without really developing a strategy that will work for them over the long-term. To give you some perspective, I'm still in the process of working on the very same trading strategies that I've been developing over the past 10 years.

In sum, be introspective, but don't let a trading rut force unnecessary changes if you've been doing well and making substantive progress overall. Up, downs, and lots of "in the middle" are to be expected. A great analogy to the learning curve we all experience as traders is very similar to the process of losing lots of weight. You can have a great diet and work out daily, but it takes time for your body to understand that it must slim down and shed the fat and ultimately make progress toward your goals. The reason why many people don't lose weight is that they give up before they start to see positive results. They're working hard and sacrificing, but when no results come they quickly lose the motivation. I see the same thing in a lot of traders. A lot of people are doing a lot of "right" things but they grow impatient because they think everyone else is making tons of money, they set very unrealistic expectations, and when things get tough they give up. Frankly, a lot of investment advisories prey on those emotions because they often imply how easy it is to get rich trading stocks if you just listen to them. I've said this before and I'll say it again - this is not easy. Anything and anyone that promises you big bucks with no work should be ignored just like all of the weight-loss scams the promise significant weight loss without a healthy diet and exercise.