The more successful and experienced you become as a trader, the more in touch you are with your strengths and weaknesses. Just like a pitcher in the MLB, they are aware of what types of pitches they throw that give the opposition difficulty. On the other hand, a good trader can tell you what their bread and butter trades are in today’s stock market.
However, from time to time, you’ll hear about other traders making large sums of money doing something that you’re not exactly well versed at. So, instead of trying to learn what exactly they see, you blindly jump in with profits on your mind.
Generally, when you can’t explain why you’re in a trade, along with the exit points, you’re already on shaky grounds. However, it’s human nature to get caught up into something, but it should still be our main focus.
The worst is when you take on a trade that is out of your wheelhouse, and it ends up eating away at entire day’s profits. This type of behavior is often referred to as style drifting. Style drifting is one of the worst habits to have as a trader in today’s stock market.
How can you avoid style drifting in trading?
Well, an easy way is to consistently reinforce yourself what your bread and butter trades are. By categorizing your trades, you’ll be able to figure which ones are the best based on P&L. On other hand, you’ll find out which types of trades don’t suit you well. Getting familiar with your own trades will help you focus on what needs to be done in order to be successful in today’s stock market.
Now, there is nothing wrong with trying new trading strategies. However, these trades should be sized so small that it doesn’t affect your overall P&L. If you’re trading was conducted like a business, then these new trades are trying to show proof of concept. Once they show enough promise, you then can increase your share size and scale up.
With that said, keeping a trading journal is extremely important. There is no way you’ll be able to remember every single trade in your head. Eventually your brain gets foggy, and you tend have selective memory when it comes to your trading. However, a detailed journal will allow you to refresh your memory and walk through the entire process over again for today’s stock market.
Not only that, but it will keep you accountable for your actions. For example, some traders might plead ignorance as their defense for putting on a bad trade. But if they only studied their performance, they would know exactly how they fared on specific types of plays.
As noted earlier, you should always work on your skills and new ideas. But always focus on your bread and butter trades, and see how they can be better. If you’re unsure of what they are, it could lead to style drifting, trading aimlessly without a plan. A great way to avoid style drifting is to review and journal your trades. Style drifting happens to everyone, but the better traders make it less and less of a habit in today’s stock market.