Master The Basics Before Shooting For Performance

& why committing to this can save you 10%+ drawdowns on your account

Aug 19, 2023

Today at a glance:

The fundamental basics behind a successful trading strategy
My own case study behind how skipping this has cost me 1,000s
3 Applicable Takeaways

Thank you for reading!

Let’s face it: profitable trading is incredibly difficult. And, to make matters more difficult, social media makes it seem like every other trader is making a shit ton of money except for you.

For this reason alone, it’s easy to believe that you can skip going through the basics once you have found a profitable edge. However, before you can strive for super performance, there lies an unshakable truth: mastering the basics is the cornerstone of lasting success in the market.

Drawing inspiration from the wisdom of renowned market wizards like William O'Neil, Nicolas Darvas, and Jesse Livermore, we delve into the pivotal concept that every trader must grasp – the mastery of the basics.

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What are the basics in trading?

At the heart of trading mastery lie three fundamental pillars:

A Single Strategy: Simplicity is the ultimate sophistication. A single, well-defined trading strategy will act as your main reference point to extract money from the market, over and over again. It's the culmination of careful research, a ton of time in front of the screens, and a deep understanding of the environments in which your edge is best implemented.
Simple Rules Behind Risk Management: Risk management isn't just a box to tick – it's the bedrock of survival in the trading arena. Setting clear rules for position sizing, stop losses/profit taking orders, and portoflio concentration is simply the only way you’ll keep any of the money you make.
Simple Guidelines behind Trading Psychology: The human mind can be both your greatest ally and fiercest enemy in the market. Mastering how to understand your emotions, practicing discipline, and developing a resilient mindset are essential tools to weather any hardship you’ll face.

The Boredom Factor: Let's face it – the basics might not be the most exciting part of trading. The allure of making a ton of money by executing a new, complex strategy and reaching financial freedom can make mastering the basics seem quite boring in comparison.
Instant Gratification Illusion: It's a paradox, but the very essence of trading is often misunderstood. Some believe that diving into advanced techniques will yield quick riches, when, in reality, a solid foundation in the basics is the true shortcut to sustainable account growth.
Premature Advancement: Impatience can be a trader's Achilles' heel. Celebrating a couple of successful trades might lead to the assumption that you've outgrown the basics. However, genuine progress is built on consistency, not the money you make over a couple of weeks.

But, this begs the question:

When do you allow yourself to move on to the next level?

Recognizing when it's time to progress is a pivotal question. Consider these two key indicators:

Money Management Mastery: If your profits tend to come in bunches and your losses mirror this pattern, it's a signal that you haven't yet truly embraced the principles of risk management. This is the ‘boom and bust’ type of trader. Instead, steady, controlled growth is a hallmark of a trader who has mastered the basics. Your account equity curve should go from lower left to upper right OVER YEARS, with minimal giveback/drawdown.
Emotional Equilibrium: Emotional roller coasters can leave you making irrational and irresponsible trading decisions. If your emotional reactions dictate your trading moves, it's a sign that you're yet to internalize the psychological tenets of trading. Instead, you should be able to completely remove your emotions from the process, understanding that executing your edge over and over again will put you on top. Once you’ve conquered hesitation & fear, you may be ready to level up.

A Personal Case Study: The Value of Embracing Basics

Here’s a quick dive into my trading performance & the struggles I’ve delt with, just over 4 years into my trading career:

Since the peak of growth in February 2021, I’ve been in a drawdown. After each rally, my eagerness to jump ahead of the basics & put on my super performance cap led to a realization – account progress was stalling, I was getting frustrated leaving a ton of gains on the table, and all-time account highs still remain elusive. As I look back, it's evident that skipping the basics was and continues to be the root of the issue.

Here’s my account equity, line over the past 4 years, to be transparent:

The journey of trading is a continuous evolution. It demands humility to revisit the basics, refine strategies, and nurture a resilient mindset. I’m writing this from my own experience, hopefully acting as a timely reminder for anyone also struggling and looking to get back to account highs.

3 Main Takeaways From Today:

1. Master the Foundations Before Aiming for Super Performance

The Takeaway: Understand that mastering trading isn't something you can do overnight, or even in a handful of years. It takes time, and most of this time should be spent on mastering the basics.

2. Embrace Simplicity and Disciplined Consistency

The Takeaway: Simplicity in your trading approach is key. While complex strategies might seem enticing, success often emerges from a straightforward, well-studied trading strategy. Devote time to understanding the market and refining your edge. Embrace the importance of disciplined risk management – it's not just about winning trades but defending your capital. Create a list of clear rules that will serve as your operating agreement with the market.

3. Transitioning to Super Performance Levels Requires Steady Progress

The Takeaway: Rushing through the basics is a common pitfall. Instead of seeking instant gratification, focus on consistent progress. Acknowledge that prematurely advancing can hinder true growth.

Until next time,

Greg

More resources to study to continually master the basics:

2020 Best Charts: https://gregduncan.gumroad.com/l/wmfsd

2021 Best Charts: https://gregduncan.gumroad.com/l/2021

2022 Best Charts: https://gregduncan.gumroad.com/l/2022

Earnings Gap Up Mastery Free Email Course: https://upsideunlimited.com/earnings-gap-course

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