Today I want to address the answer to a question that is asked very rarely but is critical to long-term results.
This question is shaped as follows:
What is the best system for you?
Let’s start with a story.
John likes driving fast and takes part in street races. Adrenaline, risk, quick decisions, control over himself and his car in narrow streets is what he likes.
Charles is a phlegmatic, he likes to think everything over, he does not like to make hasty (read fast) decisions. He prefers when things happen calmly and he has time to think about how best to react to them.
John and Charles are two different people with different temperaments.
And now let’s explore what systems work best for them and why.
1. Scalping trading system
Now imagine that we have a super great scalping system. It can produce excellent results as shown by the statements (account results) of the people who trade with it. It gives several signals a day, the trade itself lasts from a few to several minutes. Such trading requires concentration, quick analysis of the situation and the ability to make quick decisions.
Who do you think has more chances to make money with this system? The active John or the phlegmatic Charles?
The answer is John, the system is more suited to what is natural for him and what he likes.
Charles will not find himself in situations of making dozens of quick decisions a day. I mean, he can force himself a lot and even achieve some results, but it will be hard for him because his mind and psyche function in a different mode.
2. Long-term trading system
Now we have another great system: long-term, where we hold trade for weeks or even months. Here we have a lot of time to decide on the entry, including what size we will bet. Here in turn, Charles may have a definite advantage — a time frame that he likes and is mentally prepared for such a mode of work.
For John, on the other hand, it can be an ordeal, not only that nothing is going on, but in addition when the system take a loss it stay there for weeks and “you can go crazy”.
A friend who made his living scalping told me that once he entered a long position and the situation destroyed him psychologically. He had the habit of constantly monitoring the trade so for nearly a month he slept only on weekends. He made excellent money on this trade, but the experience exhausted him so much that he told himself never again! The money was not worth his damaged psyche.
A long-term trader, on the other hand, after scalping training, said it was not for him, because “there is pure chaos on the minutes, nothing here gets to me”.
As you can see from these two examples — depending on what you are used to and what mode your brain is comfortable in — you will have the best results with a system that is adapted to your temperament, risk appetite and decision-making mode.
Trading with other systems you can achieve success but it will take work and changes in yourself. I have seen situations, that Charles forced by life to change, was able to quickly mobilize and change his mode of work, thinking. He was able to learn new things fairly quickly and did well in his new situation.
Was it the discovery (out of necessity) of new talents far removed from what he knew or was he just malleable enough to have to find himself and tried so long until he found himself? I don’t know, many times working with people I have seen how they can mobilize themselves incredibly when needed.
I can say that most of us have reserves, possibilities and abilities that we are completely unaware of.
Before I get to the final conclusions one more comment.
Risks change. The systems that worked a year ago do not work today, the systems we know today will not work tomorrow or a year from now. Trading requires following the changes. Take the example of Charles and John, two people who trade the scalping system.
John is likely to see changes sooner. Charles, struggling with himself and his natural inclinations, will be more preoccupied with himself, he just won’t get to it as quickly that something has changed.
Our main brain mode will either help or hinder our ability to notice market changes. Charles will adjust more slowly, meaning that the same system in his hands will have more losses than John, who will adjust smoothly to a changing situation.
And to summarize our stories: three observations
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We have some main mode of mind and psyche and some systems will suit us better and others will not. It’s worth trying different approaches to see what we’ll feel most comfortable with and where we’ll get good results most easily.
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But it is worth trying different things, including extreme ones — from scalping to long-term trading.
Also because short and medium-term traders tend to move to longer time frames once they are successful, and also because their systems don’t work as well as they used to, as entering with larger positions starts to affect the markets (Forex is an exception here, due to the liquidity and depth of the markets).
- When trying different things, be aware that it will require you to learn new habits and find yourself thinking in different ways.
That is, work not only on learning the system but also on yourself.
As a result, you will become more flexible and sensitive to change, you will expand the number of mental tools you use to perceive, analyze and understand the markets.
It’s also a step towards being one of the best traders who make the most money.
