Pete was the oldest of the three brothers and knew there was a better way, he knew there were people who consistently made money in the markets and that if he did the same things that they did, he too would be profitable. Before opening an account with his broker, Pete spent months studying all of the different topics. He quickly learned that there was much more to being successful than just having good entries. He learned ways to study his trading system and quickly realize if over time it was going to provide a profit or loss based on it's expectancy. He learned about the 2% rule and position sizing, so when he was wrong about the market, (and he was wrong quite often) he would get out quick, without any emotional pain and with very little damage to his trading account. Pete started using limit orders and shopped around for the brokers with the best prices, and learned about slippage and just how big of a hidden cost that is to a trader. Pete was not the smartest of his brothers so he decided to keep his trading system very simple, he was a busy man and didn't have too much time to spend on his trading activities. Pete than learned that you can apply money management to your entire account and not just each specific trade. He learned that different systems were needed depending if you are using a trend following system or a counter trend system. Pete had a written plan that he could follow so there was no need to make any decisions along the way, when the position has already been open. He decided he would judge his performance on how well he was able to stick with his trading plan, that way he would be able to create a level of consistency and make improvements along the way. Once Pete opened his account, he started to put on his trades, right out of the gate he had 5 losses in a row, but looking at his account balance, he felt fine. His losses were controlled and his first winning trade put him ahead. He never felt out of control, as he had a plan set out for every single possibility that could happen.
Pete didn't get very much emotional satisfaction from trading, he felt it was almost boring, it was a very mechanical procedure with nothing left to chance. Pretty soon he was almost able to predict how his account would look at the end of the year with it's up's and down's. He had to look to other areas of his life for thrills. Pete's account continued to grow, he would then increase his position size appropriately and it would grow some more. Pete kept extremely organized records of his trading and was able to identify if anything seemed to be out of the normal flow. When it was he made adjustments to his trading plan and continued. One day Pete's Broker asked him, "How is it that you can trade these crazy markets and make money each year?" Pete replied, "In a nutshell, you must learn how to control your risk based on your personality, and account, then you must have a system that can be followed and executed at all times, additionally you must let you profits run." "I know all that!" said the broker, "I tell my clients that sort of stuff all the time, but almost all of them still get sent to the slaughter house." Knowing something, and understanding something are two completely different things. said Pete, "everyone knows that an engine is what allows a car to accelerate and take you where ever you want to go. But how many people understand exactly how it works and why? This understanding will take you to a new level and allow you to be successful regardless of outside conditions, because you will be able to adapt your engine to the current conditions." His broker agreed and now takes out Pete out every 2nd Tuesday to play golf while learning more about money management. Pete's money management was made of brick.
Pete didn't get very much emotional satisfaction from trading, he felt it was almost boring, it was a very mechanical procedure with nothing left to chance. Pretty soon he was almost able to predict how his account would look at the end of the year with it's up's and down's. He had to look to other areas of his life for thrills. Pete's account continued to grow, he would then increase his position size appropriately and it would grow some more. Pete kept extremely organized records of his trading and was able to identify if anything seemed to be out of the normal flow. When it was he made adjustments to his trading plan and continued. One day Pete's Broker asked him, "How is it that you can trade these crazy markets and make money each year?" Pete replied, "In a nutshell, you must learn how to control your risk based on your personality, and account, then you must have a system that can be followed and executed at all times, additionally you must let you profits run." "I know all that!" said the broker, "I tell my clients that sort of stuff all the time, but almost all of them still get sent to the slaughter house." Knowing something, and understanding something are two completely different things. said Pete, "everyone knows that an engine is what allows a car to accelerate and take you where ever you want to go. But how many people understand exactly how it works and why? This understanding will take you to a new level and allow you to be successful regardless of outside conditions, because you will be able to adapt your engine to the current conditions." His broker agreed and now takes out Pete out every 2nd Tuesday to play golf while learning more about money management. Pete's money management was made of brick.