A few years ago I talked to the legend of trading, Larry Williams. One of the things I paid attention to was saying that if he had to do something again, he would devote more attention to his most “loaded trades”.
Similar conclusions are evident among institutional traders, and although I did not conduct separate research on this issue, it seems that for many of them a small percentage of trades is dominant for profitability. This is similar to the Pareto principle.
Weaker traders don’t have such a high profitability cluster.
And here comes a serious difference (actually two) between the best traders #Top10% and the rest…
The first – the best are stronger mentally and more resistant to stress, this allows them to withstand longer to reach TP. It’s not easy to scare them off the market, it’s not easy to break their self-confidence and concentration.
The best are just mentally tougher, they also have additional tools to support their professionalism and mental strength. Thanks to it, they are able to withstand the pressure of the market being on it with a high trades, which mentally weaker traders are not able to do.
The second element is probably the better ability to choose the best opportunities. Although I don’t have research showing whether the best really choose the best deals, I conclude this on the basis of my many years of observation.
But it does not have a special meaning, because my goal here is not a theoretical discussion. The aim is to draw some practical conclusions that may serve traders, teams, funds or banks in improving their profitability.
So let’s get to the hints:
- The best traders have from a few to a dozen or so the best trades quarterly or annually. How does it look in your case? If you have such very good entries – what do they all have in common? How can you increase the number of these trades? Can you more actively look for such opportunities? Can you be better prepared to trade on them? Can you focus only on them?
- The best use more aggressive capital management – in short, they enter larger positions on the best deals. Finding these best opportunities and aggressive focus on them can be the way for you to dramatically improve your profitability.
- Usually, a certain percentage of trades is closed too quickly. How does it look like in your case? Think about it and answer yourself, what were the reasons for closing it too soon? Was it technical or was the mental pressure too strong and you were thrown out of the market? This may indicate that the way to improve your profits is to strengthen your mental toughness.