Trading Philosophy


A trading philosophy is not the same as a trading strategy. There is an almost infinite amount of trading strategies in existence:

Fibonacci, moving average pullbacks or crossovers, price action, trend following, anti-trend following, MACD, RSI, Stochastics, Bollinger Bands, Keltner Channels, Renko Charts, Candlechart patterns, pattern recognition, Elliott Wave Analysis, and the list goes on and on.
Of course, you need a strategy to trade. Even flipping a coin to determine if you want to be a buyer or a seller is sort of a strategy. What all strategies have in common is that they ALL work sometimes, but none of them work all the time.

What makes trading the difficult endeavour it is, is the fact that markets at times are trending, and at times are rangebound. When the market is trending, any trend following strategy will perform well. Any strategy that attempts to “sell short overbought conditions” or “buy oversold conditions” are likely to perform poorly in a trending market. On the flipside, any strategy trying to trend follow a rangebound market will experience many small losses.

So, if a trading strategy is not the same as a trading philosophy, then what is a trading philosophy? The answer lies in the belief that trading is so much more than just having a trading strategy. When a trader experiences a losing streak, he (or she) is unlikely to think in the same manner than when he is on a winning streak.

By having a trading philosophy, which operates like a repeated mantra at the back of my mind, I have found myself not succumbing to the traditional pitfalls of less experienced traders. I have recorded a couple of YouTube videos, which explains this in great detail:

https://youtu.be/ozaOAupN5_Q

https://youtu.be/d7wQIsdiXZQ

If you have any questions for me, please contact me on hello@tradertom.com.

Tom Hougaard