The MOST important factor

I need light relief from an eye straining exciting weekend of studying LII, et voila, a survey.

What is the most important thing to you when your about to enter a trade. Which aspect takes precedence and is the most vital aspect of any given trade?

Hi Chris,

I voted 'other' so shall explain. The only important thing to me is:

'Am I following my trading plan?'

All I want to know is that I am following my own rules, because if I do, I am pretty sure I'll make money over the long term. Individual trade outcomes are not really relevant. I don't care on an individual trade basis if I am right or wrong, as long as over the longer term the profits outweigh the losses.

BroadSword said:

Hi Chris,

I voted 'other' so shall explain. The only important thing to me is:

'Am I following my trading plan?'

All I want to know is that I am following my own rules, because if I do, I am pretty sure I'll make money over the long term. Individual trade outcomes are not really relevant. I don't care on an individual trade basis if I am right or wrong, as long as over the longer term the profits outweigh the losses.

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Agree with you there, and its a great philosophy.

What then, was the most important factor when you outlined your rules?

Impottent please reed

chrisw said:

I need light relief from an eye straining exciting weekend of studying LII, et voila, a survey.

What is the most important thing to you when your about to enter a trade. Which aspect takes precedence and is the most vital aspect of any given trade?

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Attention to detail.
Without this your account will soon become improtent....

chrisw said:

What is the most important thing to you when your about to enter a trade.

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About to enter a trade? So, I've already identified a particular stock, currency pair, VWAP pair - whatever. I've already assessed the overall sector and market conditions. I already know my entry point and criterion (or criteria) and my exit criteria (always plural). I've calculated my position size based on my trading capital and risk profile for this type of trade. I don't have anything else pressing that is likely to require me to take my attention off my position once open or if I can't guarantee myself that, I will set mechanical stops and limits.

Nope, sorry. There's nothing that's any more important than anything else after I've done all the prep.

TheBramble said:

About to enter a trade? So, I've already identified a particular stock, currency pair, VWAP pair - whatever. I've already assessed the overall sector and market conditions. I already know my entry point and criterion (or criteria) and my exit criteria (always plural). I've calculated my position size based on my trading capital and risk profile for this type of trade. I don't have anything else pressing that is likely to require me to take my attention off my position once open or if I can't guarantee myself that, I will set mechanical stops and limits.

Nope, sorry. There's nothing that's any more important than anything else after I've done all the prep.

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No, just before all that.

chrisw said:

What then, was the most important factor when you outlined your rules?

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Just that the method had a statistically valid edge, through the application of (among other things, but most importantly) a structured money management plan.

making money.

i was going to say patience, balls & discipline, but 2nd thoughts the 1st is more important.

thats why we trade isnt it?

i dont care how well you follow your plan, how big you think your edge is, what platform you use, what method you use blah blah blah, yada yada yada, if you cant make money, yer fooked.

trading is the ultimate meritocracy. you do or you die. there are no excuses. you eat the market or it eats you. there is no second chance after the trigger is pulled.

all the plans, knowledge, fancy tools, etc wont help you if you havent figured out how to make money.

charliechan said:

making money.

i was going to say patience, balls & discipline, but 2nd thoughts the 1st is more important.

thats why we trade isnt it?

i dont care how well you follow your plan, how big you think your edge is, what platform you use, what method you use blah blah blah, yada yada yada, if you cant make money, yer fooked.

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but if you don't concentrate on minimizing risk, you could wipe out before your rich.

chrisw said:

but if you don't concentrate on minimizing risk, you could wipe out before your rich.

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nope.



i admit that unless you minimise risk you are unlikely to make green, but that is why you minimise risk - TO MAKE MONEY!

its like saying whats the most important part of a journey ?

a/ getting there
b/ a map
c/ a car

i will always say 'a'. i dont care how i get there - with or without a map or a car - so long as i get there. you see? (please - no smart ars'd remarks abot 'the experience' being more important from anyone )

what you have done is present a list of options, the first of which is the goal, the others are a series of methods.

do you agree?

charliechan said:

nope.



i admit that unless you minimise risk you are unlikely to make green, but that is why you minimise risk - TO MAKE MONEY!

its like saying whats the most important part of a journey ?

a/ getting there
b/ a map
c/ a car

i will always say 'a'. i dont care how i get there - with or without a map or a car - so long as i get there. you see? (please - no smart ars'd remarks abot 'the experience' being more important from anyone )

what you have done is present a list of options, the first of which is the goal, the others are a series of methods.

do you agree?

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Yes and no.

The question wasn't 'Why do you trade?' but 'Whats the most important factor, or rather the first factor you consider when looking to place a trade?

I agree the reason we all trade in the long run is to earn a living to put the food on the table, the freedom or for a yacht or whatever, and making a profit IS much better than watching the bar go up and down till it weakens off but, its the trades pro's and cons that should be considered first.

I know when I first started out, I looked out for my target first and I'd move the stop accordingly until I realised I was fighting a losing battle. Now, I look at the risk first and the profit second although it may be my main goal.

So yes, making money is the goal, but minimizing risk in each trade is vital to me.

Making money----------------------------------very important, won't trade for long if you don't
Being right----------------------------------------very important, won't make much money if you are never right.
Minimising risk----------------------------------very important, will lose a lot of money when you are not right otherwise
I don't think I just press the button-------very important, should have done all your thinking before you finger gets near the keyboard, thinking at this stage causes missed entries and exits.
Other (please specify)------------------------very important, have a plan, know your plan, be disciplined, understand your market, understand the instrument you trade.
There is no mileage in identifying a "most" important thing, everything is important, ranking them simply leads to something not getting enough attention. If minimising risk towers over everything else in importance then don't trade, can't minimise it any more than that.

IMHO the most important factor is knowing yourself and thus being aware of your true abilities and thus gain confidence through a positive expectancy and elimination of fear of failure and through this self knowledge allied to earned knowledge and experience of repeated success then one can have the salutary awareness that their worst performance will be good enough to end the day with a profit. Anyone can have flashes of brilliance but it's the bottom line we need to be watching and taking care of.

This can only be achieved through abandonment of ego, humility, obsessive will to succeed and above all super human self discipline.

Practise all of the above and there will be many other unexpected rewards on the way.

chrisw said:

but if you don't concentrate on minimizing risk, you could wipe out before your rich.

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i dont want to get into a semantics thing here, but i think this one needs more focus.

i think perhaps the best angle would be risk appreciation.

if we minimize risk totally, we have no risk - i.e. we dont trade. we must take risk, and embrace risk in all its dimensions. only once we have fully understood risks can we progress to the next levels. the step before appreciating and understanding risk is understanding ourselves. an old adage but its true. rols skirts this issue, but at least it has been raised.

there are several things at risk when we trade with little (few years of) experience: the obvious risk of money, but perhaps more importantly the risk of losing our confidence or ego.

i have found the hardest trades to take are when we perceive risk to be at its highest, but when we analyse the trade from hindsight, we often discover the trade in fact had very little risk. there is always LESS risk at the start of the move (in proportion to potential and unknown rewards), yet this is the point where risk often appears to be highest due to the lack of confirmation (information to please the conscious). once that confirmation has been established, risk is inevitably higher, as the controlling money is now looking to take some or total profits, knowing they now have the liquidity to do so - now the 'fools have rushed in'. that confirmation could be of many forms - it could be a news item for a fundamental investor, or it could be the breach of a technical level for a day trader.

so actual risk and perceived risk are in fact two very different and often opposite things.

well thats how i see it anyway!

Being right must be the most important item on the list, in all it's forms and context. As for all the 'know thy self' stuff that's bandied about on here...forget it, it's elaborate talk for people who just don't know what they are doing, interesting though.

mr.marcus said:

....most important factor..without doubt......"know thyself"

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Agree.

IMHO anybody who does not recognise that they are not trading against the markets but against themselves is a fool. This can be a very expensive lesson.

What comes first, knowing yourself or your trading self? How do you ever realise your trading self without trading experience? Knowing you have the correct trading personna boils down to trading experience, being right or not will give you a clue to wether you have got what it takes or not. So, being right is still the most important factor.

I dont see how 'being right' can be right.....as at what point do you declare yourself 'right', surely you are only right or wrong at the conlusion of the trade....& I wouldnt even call it this.

I wouldnt say there is 1 thing so cant really see the point in trying to determine it......surely it is just having a sound trading plan based on good logic , that you have faith in ( very important), following that plan while being in control of yourself......but realising you have no control over the market, being detached from the outcome
jay

The thread has drifted away from the main original question.

The question being;

'What is the most important thing to you when your about to enter a trade. Which aspect takes precedence and is the most vital aspect of any given trade?'

So be it discretionary or when you are backtesting, what is more important?

The profitability - making money?

The ego - being right?

Minimizing risk - making sure that despite the winners, the maximum drawdowns you encounter and ensuring when you lose, you lose small?

This isn't a pyschology question, its purely a 'business' point of view.

Chrisw....yep ok read ur question bit deeper & see what u are asking.

I cant really say there is a most important thing for me , but to answer your question from your list the best I can it would be to 'minimize risk' .....as this is the only thing initially I can some degree determine.

J