3 Trading Quips That Will Improve Your PnL
One of the most important lessons I've learned in life is working with the mind you've got. Since each one of us is wired in such a distinctly specific way, it makes sense that we would each have our own ways of doing things, of learning, and growing. What works for me may not work for you, and vice-versa. Therefore, the first step in any mission of personal development has got to be turning inwards and figuring out just how your own mind works, and then developing the habits and strategies that compliment your own unique makeup.
For me, when it comes to complicated and highly nuanced topics such as trading and trading strategy, that means that I often need to hear certain concepts ten different times, in ten different ways until I find that specific sentence, or manner of reasoning, that resonates on a deeper level than it has before. It is only once I can make this personal connection to the subject that the information infiltrates the outer layer of my understanding and plants itself deep inside the overall mental construct I'm working with.
However as unique as each of us is, we sometimes find phrases, or specific ways of explaining an idea, that can have widespread appeal and leave an impact on most who encounter it; regardless if we refer to it as a saying, quotable, or 'quip'.
Trading is no different, with certain phrases standing the test of time and offering the value of leaving an important idea firmly embedded in your mind. Here then are 3 trading quips that helped do just that for me when I first began building my trading fundamentals.
Nobody ever went broke taking profits
One of the first quotables that ever made me think 'wow, that makes way too much sense!' – though it seems so obvious now – was 'nobody ever went broke taking profits!'
As an inexperienced trader, I had accidentally become an investor, unbeknownst to me, holding trades while dreaming of early retirement and first-class tickets to travel the world. Naturally, this led to holding losing positions for much too long – reasoning that the project was too good to fail – while not getting paid for winning positions – this time justifying the mistake by thinking that if the project was actually that good, prices were still much too low to sell, regardless of how far they'd already risen. Because while that might turn out to be true eventually, I was forced to learn 2 things very quickly:
1. 'Eventually' takes a really long time to get here.
2. Waiting for it requires world-class pain-tolerance, a trait I was far too familiar with from my poker days and had absolutely no interest in attempting to resurrect unnecessarily.
That's why these days I recognize that by taking partial profits at sensible price-levels, not only do I increase my liquidity for buying dips, but I get to avoid the pain of getting stopped out of a good trade with nothing to show for it.
Love a price, not a stock (or coin)
This next quotable, which I remember first hearing about on an episode of the popular trading podcast Chat With Traders, is the one that really helped me execute on the profit-taking mentality from the previous quip. Once I recognized that my goal was to become a good trader rather than investor, I worked diligently to eliminate emotional attachments to individual cryptocurrencies or stocks and put my entire focus on identifying important price levels and reacting to the market's own reaction to these areas, be it by taking profits as major resistance levels or waiting for the appropriate entry-spot rather than buying in based on love for the project or company alone.
The trend is your friend
Probably one of the most well-known trading quips out there, 'the trend is your friend' is one of those quotables that you could at first hear a hundred times before finally giving it the full respect it deserves. Having come to trading from a poker background, I had spent the better part of the past two decades focused on utilizing a contrarian-heavy approach – playing aggressively in spots most were tight and more conservative in situations where the population was overly loose. However, when it came to trading, I eventually learned, being contrarian was often just a fancy way of saying being wrong.
Because while there are definitely times to go against the herd – for example, selling distribution zones while most are greedily buying vastly overextended prices – the simplest trades often demanded nothing more than piggy-backing a volume surge and swimming with the current, rather than tiring yourself out by flailing against it.
Now rather than trying to outsmart or 'front-run' the market, my studies center on identifying clear established trends. Once I do that, I work at finding sensible price-levels to enter at going in the same direction as the macro trend during pullbacks using major support and resistance lines as well as the 50 & 200 day moving averages.
By internalizing the lesson found within these 3 trading quips – trading with the trend, falling in love with prices over projects, and protecting my capital by consistently taking profits – I was able to improve my PnL and, most importantly, reduce my risk exposure and give myself a significantly better shot at profitably transitioning from one of the toughest games in the world to another.