SCOTT WELSH TRADING BLOG

True Motives

True Motives

Mar. 3, 2021

It’s happened many times.

In a first lesson with a new student, I’ve asked them what they want from their tennis.

Their answer? “To get a high ranking.”

The truth? Not so much.

Why would they misrepresent? Many reasons.

Maybe they say what they think adults want to hear. Maybe they’re doing it because their parents are making them. Maybe they want to be try to be cool like their friends.

It could be one or all of those things, but the bottom line is: they don’t want to get better.

Well, that’s not entirely true.

They do want the high ranking. If it was just given to them.

But, unfortunately, after the first tournament loss, true colors come out.

Losing is awful. They didn’t sign up for that.

And so they move on to other things.

At times, I’ve tried to save them. I’ve tried to explain how losing is a part of it, but not a bad part. If they’re willing to lose and understand why they lose, amazing things can happen. I even give examples of kids who have struggled and then gone on to become one of the best players in the country.

But, unfortunately, their goal of a high ranking falls easily by the wayside. Losing conquers all.

Trading is no different.

I’ve said I want to be a great trader with world-class returns, and then thrown out a profitable system because I didn’t like the losing.

I’ve said I want to make life-changing money, and then tried to optimize my way out of every drawdown.

But then I studied trend following for many years. And it taught me a very important lesson.

If you find something with timeless principles, losing is okay. Losing doesn’t need to be avoided or fixed.

Losing just means a big trade is coming.

Here’s a test.

Last night in the live webinar, I talked about this portfolio of three breakout strategies (tested on the Master Trend robot)? It hypothetically turns $70k into $16 million (from ’03-’21):

The max drawdown 1.5x less than a basic index fund yet it hypothetically makes 23,000% more than an index fund. Would you trade it?

Who says no?

Everyone.

Why? Many reasons but mostly because it has losing years. It’s negative in 2006, 2010, 2013 and 2020.

It’s up big in 2021, but who cares? Who would have kept the robots on after being negative last year?

Great players lose matches and great systems have losing years. Players who make it to #1 know that and traders who make big money know that.

We say we want to be outstanding traders.

What do we really want?

Talk to you soon.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.