Mindset: Method hunting treadmill and importance of risk management

Trading is about managing pain, you’ve got to get used to losing and not thinking that you’re making a mistakeanon trader

Just heard an interview on Chat with Traders and felt there were a number of great pointers for people like me grinding it out in the early parts of the trading journey.

One thing that really surprised me is the part on systemising a strategy and how the discretionary element of the strategy can make something that seems profitable, unprofitable (starts at 14:40).

The following also felt particularly applicable to me and some of my old habits:

11:52 – 14:15 The ‘method hunting’ treadmill of new traders who obsess over entries and win rates.
21:20 – 22:24 Really understanding your strategy and accepting a lower win rate.
33:28 – 41:35 The importance or risk management and position size
49:30 – 52:14 Lack of risk management for a given strategy and not looking at position size, market correlation and trade approach together
52:14 – 53.45 The mistake of trying to achieve a linear performance and not truly appreciating that you win some, lose some.
53:50 – 54:40 Why you should only review performance in batches of trades so your changes are valid and meaningful.
55:50 – 56:03 The best advice of all, riding out the pain of a run of losers

Some other good quotes

(new traders) focus on the entry and when things stop working they go back to the drawing board … down the rabbit hole looking for Alice. That’s the treadmill most retail traders get on in the beginning. We call it method hunting.
new traders aren’t willing to accept a lower win rate because it doesn’t feed the psychology. They don’t want to experience any pain … human beings are always uncomfortable with risk but it’s really about how you manage it (that makes you a successful trader).
Being a good discretionary trader is about managing discomfort
The most important thing is risk overlays: how you bet, what size and how you’ll adapt to volatility over time.
Each time you trade the deck has been reshuffled and if you lose it really doesn’t mean anything … you win some you lose some and you have to be comfortable with that. So start thinking about blocks of trades rather than analysing one or two losers
If I lost this trade it must mean I made a mistake, and if I win this trade it must mean I’m pretty smart. Unfortunately the truth is neither is true. You win some you lose some and you have to become very very comfortable with that and grind it out