Q/A - Any suggestions on following the WPT system?

Kerry,

I am having trouble mimicking the results of the WPT system. I am profitable for the year but nowhere near the how the system performed. Any suggestions would be appreciated.

I realize part of my partial result I was not able to take every trade.

Thanks!

This is a very good question and there is no great answer.

Rarely will anyone duplicate any system results precisely. Remember that the reason for me posting the system and tracking a public portfolio is to help show how to trade a system and follow it in a discipline way. I prefer to teach how to trade not be followed blindly. Regardless of the system duplicating results is nearly impossible. However it is there to show the potential of a system and results could be obtainable within a margin of error. I do not have enough data to suggest what that margin of error is, but I have seen results from others that were within 5% - 10% on both sides.

One client has reported much better results and this was due to the fact he caught trades I missed although his largest drawdown is also larger than the Discretionary Portfolio. This particular client has a much deeper risk appetite than I. I have seen other results that are within a small margin of error. How close one mimics the portfolio is determined how exact one trades the portfolio.

For example if you were to miss the two largest winning trades, the results will have a very different look. This month if one did not take the re-entry on SQM, you make $2,500 less in the portfolio. If you scratch SNDA and do not hold it, one makes $5,500 less. If you attempt to only trade one of the picks, you may pick the one that lost money and not trade those that made the money. My suggestion is take the model portfolio and learn how to build and develop your own system that you are the most comfortable with so you are NOT trying to mimic someone else. I would much rather see you develop yourself into the type of trader you desire to be with a system that works for you. Some traders find that the WPT approach works for them and they produce results very similar. Make sure you are not expecting the same results but trading in a very different approach.

Not long ago I worked with a client that had a very similar question and thought he was following the WPT system. After analyzing his account, he realized he was doing everything but following the system. He made trades that were never made, did not honor the discretionary stops and was not honoring the system stops. This allowed much larger losses than system ever encountered. In the end he found he was only haphazardly trading the list of stocks showing up on the WPT buy list and not trading a system at all. He was also position sizing in the trades incorrectly. He has since corrected many of these issues and since has found better results. He continues to admit he has some discipline issues and allowing losses to be much worse than necessary. I am recapping his story with his permission, he only asked for his name to be withheld.

Trading is NOT a get rich quick scheme. To be a Professional Trader takes time and education like any other profession. I have said many times, that no other profession in the world can we wake up one day and say “I want to be a Professional Trader” and within 10 minutes we can be in business trading.

I would suggest we arrange some phone consultations or an on-site visit may be worthwhile. We can conduct an account analysis and indentify what may be the road block to your success.

Thanks!

Kerry

Q/A - What strategy is best to use to become a consistent profitable trader?

A: You may be surprised by the answer I give.

The answer is NO one strategy is going to make you a consistent profitable trader. Many traders hate to hear this answer and I hope I do not disappoint you. The only thing that will enable you to consistently pull money out of the markets is YOU. One does need to use a strategy that demonstrates a profitable tendency. If it was all about the strategy, then trading would not be so difficult. We would buy a program to run the strategy and hold our bag open for the money to drop in it. YOU must have discipline, learn to control losses, and YOU must be able to take your profits. YOU must eliminate fear to trade, the fear to lose, and the fear of missing a move. You must be able to control the emotional and psychological problems that prevent success in trading. This is the difficult part of trading. Most learn chart reading and analyzing markets, but most never master the psychological aspects of trading. That will be your biggest challenge in learning how to trade with any strategy. Rather than guessing what you will do with a strategy, know what to do and then act. Right or Wrong, you will not know this until after the fact.

As a personal example, I have traded the strategy I use today for many years. A few tweaks here and there but the core basic strategy has remained. The first few years I lost at trading this strategy and most any other strategy I attempted. The major change was me and how I controlled my impulsive trades, contained my losses and captured the profits when I had them. This will be true no matter what strategy or style of trading you use. Market conditions change and run in cycles, not all strategies work in all conditions. The most difficult lesson was to learn when NOT to trade.

My personal system is set up in a way that tells me when to trade and what strategies to focus on. If I have no strategy for the current condition it is up to me NOT trade.

Q/A - Quote

Every so often I get emails that if I took the name off the email; I would think I received the same email over and over. It may be worded slightly different but they all say the same thing.

Over the past few days I have received emails that basically said….

I just went through my basket of stocks and they all look the same? I can’t find any good setups. So, what do you do?

Here is a quote by the famous Jesse Livermore. He bankrupted many times but each time he rebounded to trade successfully to always pay his creditors back in full with interest.

What beat me was NOT having brains enough to stick to my own game – that is, to play the market ONLY when I was satisfied that precedents favored my play. There is the plain fool, who does the wrong thing at all times everywhere, but there is also the Wall Street fool, who thinks he must trade all the time.

Part of one’s system and process is to tell you when NOT to do something. It is the most difficult part of trading mastery to learn the discipline to sit and wait. The only person that believes you should trade all the time is your broker. They are the only ones that benefit from such transactions. It is a falsity even for day traders to think they are to sit in front of a screen 6 ½ hours a day and trade every minute of the day.

The main purpose of the WPT portfolio was to be published and demonstrate one process and one style of trading in as real time as possible. It was not to demonstrate the best way to trade. It is only the best way if it meets your goals, objectives and fits your personality and life style. There are times where there has been nothing to trade. Maybe due to market conditions that did not favor our play or due to lack of research and thus one had to do nothing.

Forcing trades is rarely a winning proposition.

You design a process of trading to tell you when and when not to do something, then learn to careless what the market does. You want to be concern if your process is taking you where you want to go.

My favorite quote:

“It is hard enough to figure out what the markets will do; if you do not know what you will do, the game is lost.”