Last update: August 2021
Trading is exciting! It’s an adrenaline rush at times when you see those big gains, and a huge buzz kill when you get those losing streaks, but nevertheless, exciting. Especially when you’re new.
I’ve been trading for just over two years now. I still wouldn’t call myself a “veteran” trader, but I definitely don’t qualify as a new trader anymore. I’ve been in the game long enough to know what it takes to be successful, but short enough to remember exactly how it felt placing my first trade, which was actually a condor on Boeing.
Before placing this trade, I had done the analysis, structured the trade, analyzed all possible outcomes, and went to submit my order in. My adrenaline rushed. I went back and double-checked all my work, stared at the chart, and searched for any reason why it was a bad trade. Even looking back at this trade two years later, I still think it was a solid trade. I may have structured it slightly differently now based on the knowledge I’ve acquired over the last two years, but overall it was still solid. I clicked the button. My heart raced. My software jingled at me confirming my order was filled. I stared at this new position that represented my money going to work.
Now let’s fast forward to the end of this trade. Long story short, I lost… and to make matters worse, I lost both legs of this condor. I’m almost too embarrassed to admit that. But why? Simple answer is, well, that I got scared. I didn’t want for my first trade to be a loser so much, that I inevitably made it a loser. Boeing had a decent move up and threatened my bear calls so I pulled them off. Then it made an even bigger move back down, threatened my bull puts, and I pulled them off. The price had never broke major support or resistance but my fear of losing is what actually made me lose what should have been a winning trade.
It’s moments like those that you look back on and it makes you want to smack yourself upside the head for being so arrogant. Why would you place a trade if you didn’t have a management plan? Unfortunately, it took many more ignorant mistakes like this to learn what I’ve come to know now.
Trading has to be treated like a business.
Within any business, whether you own a fast-food chain, fix cars, or sell clothes, you have to have a business structure. A design for how your business should run. It gives a clear outline that says who should do what, when, where, why, and how. Within a trading business structure, you have a portfolio that should have specific amounts of money allocated to certain systems. Different systems could include directional swing trading, day trading, futures scalping, forex trading, and cashflow. Whether you use one system or 10, you should know how much money to allocate to each.
I particularly like directional trading on a day and swing-style timeframe. I’ve probably spent more time analyzing different directional trade management techniques than I have with any other trading strategy. This made me realize directional trading was where I gravitated to and enjoyed. So I focused MONTHS of time and research backtesting and forward testing different methods of trade management.
During this time of testing, Tackle released the S.T.E.P. System. I used the information that was in the S.T.E.P. System to refine my trading plan to fit my personality. Now there is no more trading on a whim. I know exactly when I get into a position and when I get out. If I lose, I make a note of the setup and if I did anything wrong and if I would have done anything differently.
Your business needs to have a structure like this or it will fail or break even. You have to be able to confidently build a trade and execute it. If you can’t, then I would stick to paper trading until you’ve proven profitable or at least until you know that system inside and out. The markets are not going anywhere so don’t try to rush gains.
When you are new, you are taught many different styles of trading from directional to cashflow to volatility strategies. Focus on one at a time. Pick one and master it and move onto the next. Run that system until you can do it with your eyes closed so that you don’t get overwhelmed by trying to run multiple systems that you barely understand yet. And just because you have been taught a system and you know the rules and how to trade it, doesn’t mean you understand it yet. Only experience can help you understand it.
I’m going to refer you to a previous blog article I wrote about that topic at the end of this article.
Using something like the S.T.E.P. System will give you the knowledge you need to create rules that fit you, but it is up to you to test those rules and trade them until you understand exactly what makes that system tick. I wish all of you out there the best of luck in your trading adventure. Keep on putting in the work and the markets WILL pay you for your efforts in the long run.
Keep at it team!
If you’d like to review some of the processes on how I used the S.T.E.P. System to backtest and develop my rules, see these blogs:
- Friday Feature: The Scouting Reports Backtest Series Part I: Why I started the backtesting
- Friday Feature: The Scouting Reports Backtest Series Part II: What I learned from backtesting
- Friday Feature: The Scouting Reports Backtest Series Part III: How backtesting shaped my trading
- Friday Feature: The Scouting Reports Backtest Series Epilogue
Justin Driskell
Justin started his trading journey during a 3-day workshop with Tim Justice in April of 2018. He has always been interested in the financial markets and the opportunity it potentially provides. He likes trading stocks and options. Outside the markets, he’s a husband, father of two boys, and full-time automotive technician.
Tackle Trading Resources on Backtesting
Why backtesting? What are the benefits? How to run backtesting? How to collect and analyze data? What types of trading systems can I backtest? What are the tools available to run backtests?
These and many other questions have been already answered in our extensive pool of articles on backtesting.
Tales of a Technician: Perfecting Your Process Part One
Traders should be process-oriented, not results-oriented.
Tales of a Technician: Perfecting Your Process Part Deux
Today we continue our carefully crafted tale on how to perfect your process.
The Day I Discovered the Wheel: Backtesting
For all of you, who just like me, felt insecure about a certain strategy, and how to apply it, I have one thing to tell you: BACKTESTING!
Options Theory: Baby Got Backtesting Part 1 – Why Backtesting?
I have a confession to make – I never used to backtest, ever. Blame it on my ignorance.
Options Theory: Baby Got Backtesting Part 2 – How to Backtest?
In the first part of our backtesting series, we explored the what and why of the process. Today we get down to brass tacks and talk about how to go about backtesting.
Options Theory: Baby Got Backtesting Part 3 – Backtesting Execution
Welcome to the third and final installment of our series on backtesting. You selected a strategy and systematized it, and now you want to see how it would have performed.
Tackle Today: Back › Forward › Live
Backtest › Forward test › Go Live. The antidote for the risk of ruin.
Friday Feature: The Scouting Reports Backtest Series Part I: Why I started the backtesting
Have you ever wondered how well the Scouting Reports picks actually perform? This is what I am answering with this 3-part series on the Scouting Reports backtesting.
Friday Feature: The Scouting Reports Backtest Series Part II: What I learned from backtesting
Have you ever wondered how well the Scouting Reports picks actually perform? This is what I am answering with this 3-part series on the Scouting Reports backtesting.
Friday Feature: The Scouting Reports Backtest Series Part III: How backtesting shaped my trading
Have you ever wondered how well the Scouting Reports picks actually perform? This is what I am answering with this 3-part series on the Scouting Reports backtesting.
Friday Feature: The Scouting Reports Backtest Series Epilogue
“[…] It all comes down to mindset. Chipper talked about how it takes a strong will to be able to fail 70% of the time and press on, practicing, playing, and striving to be better without the failures weighing down on you.” Trust your system, traders.
Tales of a Technician: Backtesting 50-day Moving Average Signals
Come learn about why the 50-day moving average generates powerful trend reversal signals.
Friday Feature: How the S.T.E.P. System helped me build my rules
I used the information that was in the S.T.E.P. System to refine my trading plan to fit my personality. Continue reading.
Tackle Trading Resources on Journaling
Trading Journals
Good traders keep excellent records. Quality trading journals are essential to your progress and growth as a trader and keeping good records will help you learn more from both your income and expense trades.
Learn more about HOW the Tackle Trading Journals can help you become a professional trader.
Trade Journaling for Beginners [Free Articles]
Continue learning about this powerful trading tool: the Trade Journals. Tackle Trading has all the resources you need to MASTER them like a PRO. From the Trade Journals themselves to free articles and tutorial videos on how to make the most out of them, we got you covered!
How to use the Theta Research Tool to find the best stocks for Cash Flow
In this video tutorial, Coach Matt goes through the latest edition of the Options Research Spreadsheet explaining how to use it to find the best stocks to cash flow.
How to use the Theta Research Journal to find cashflow candidates
In this video tutorial, Coach Tim teaches how to find the best candidates to trade cash flow options strategies using Tackle Trading’s Theta Research Journal.
Tales of a Technician: Journals, Systems and Discretion
Once upon a time I didn’t use a trade journal. Then I got smart.
Trade Journal Series: How to use the Theta Research to find Covered Call candidates
In this video tutorial, Coach Tim Justice teaches how to find the best candidates to trade the Covered Call options strategy using the Theta Research tool.
Trade Journal Series: How to use the Trade Journal
In this video tutorial, Coach Tim Justice will teach you how to use a powerful trading tool: the Trade Journal.
The Day I Discovered the Wheel: Backtesting
For all of you, who just like me, felt insecure about a certain strategy, and how to apply it, I have one thing to tell you: BACKTESTING!
Tackle Today: Organization is Key Part 1 – Trading Business
You might’ve asked yourself at a certain point: “How should I start to make this trading activity a business?”
Tackle Today: Organization is Key Part 3 – Trading Journal
A Trading Journal is not something superfluous. It is crucial. Continue reading.
Notes from a Newbie: The Trade Journal is your friend
The trade journal is your friend, use it!
Options Theory: Size Matters
Do you have consistent position sizing and are you tracking your trade stats? If not, then here’s your invitation to start.
Friday Feature: Habits of a Wealthy Trader – Part 2: Journal Your Trades
You need to treat journaling as a fundamental step in your data and behavior analysis to help you succeed.
Tackle Today: Organization is Key Part 2 – Business routine
Like any other business out there, your trading business must have a routine. Continue reading.
Women in Trading – Journaling
Journaling: I know based on my own experience that it is the most dreaded topic when it comes to trading, yet it is an important part of a trader’s journey.
System Development 101 [FREE for PRO Members]
In the System Development 101 series, we will teach you how to build your own successful trading system from scratch in any market landscape, anywhere in the world you’ll happen to be trading from, in any core business you choose to work with.
Tackle Trading Playbook [FREE for PRO Members]
PRO Members now have unfettered access to the Tackle Coaches’ personal playbook containing thirty-one powerful trading strategies categorized according to the Options Greeks. Bullish, bearish, or neutral market conditions, this Playbook will help you dial up the right call more often and with greater confidence.
Financial freedom is a journey
Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.
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One Reply to “Friday Feature: How the S.T.E.P. System helped me build my rules”
Thanks for your insight Justin.
Mariana
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