It Doesn’t Matter

There are a lot of things to focus on when learning to trade; following the daily news flows and sentiment changes, learning to read the tape, and figuring out what the price action really means are just a few. Luckily there are a couple of things you don’t need to think too hard about because they really don’t affect your long-term success as a trader.

Your stockbroker selection does not matter as long as they offer speedy execution with limited slippage and fees that are average or better. Your broker has little to do with your long term success unless you require unique features like ultra-low latency connections for high-frequency-trading, or a specialized trading product. In competing with Robinhood and eToro, many top brokers now offer commission free trading, feature rich mobile apps and desktop trading platforms, as well as easy access to margin, reducing the drastic differences between retail brokerages that existed just a few years ago.

If you continuously trade with a position size that is too large for your account, it’s doesn’t matter how much your brokerage account has grown, you will likely give it all up in the long haul. If you can’t manage risk via proper position sizing, your trades only matter till you blow up your account as you continuously face a risk of ruin; so in the long term, your short term gains might not matter.

What you withdraw from your brokerage account over time matters, not just how quickly you grow your brokerage account without making capital withdrawals. If you lose all your money in the next bear market, it does not matter how much profit you generated in the previous bull market. The expertise that counts is the ability to realize your unrealized gains and pull capital off the table because it’s still there.

If a farm raised turkey is slaughtered on day 1,001 for Thanksgiving, is it still appreciative of the first 1,000 days getting plump? While it may have been happy to have lived a great 1,000 days, I’m sure it would rather go on to live for several thousand days more without facing an unnatural risk of ruin. Remember that trading is a marathon, not a sprint.

When you have not established your edge, your trading strategy does not matter. If you can not identify your trading edge, validate it, and execute it over and over again, your attempt at systematic trading is worthless. If you don’t have trading rules, the trades you execute don’t matter, they are all rule violations. You can not quantify a long term plan towards success if you have not run backtests on your strategy to know how it performed in the past.

Don’t mistake ability, with randomness, luck, or just a strongly trending market. Outside the context of a trading system, no single trade matters in the long term. Without the background of a systems’ performance on assessed data, any single trade could just be as random as the flip of a coin.

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