30 Things to Think About Trading

Given all the geopolitical turmoil and market volatility of this past week I’m sure many people are looking forward to the weekend. And many are probably ready just go away for their end of summer vacation.

So, I thought this a good time kick back and read a recent post from Broadsword Capital’s founder Jon Boorman in which he shares thoughts on some of the things he’s learned over the 30 years of trading.

He covers a host of topics from specific trading rules, general investment concepts and personal philosophy towards life.

Here’s the first part.


Today marks 30 years since a confident young man walked into the back office of Schroder Investment Management in London, to start his first day on the job, the first in his career. Ask me a question back then and I would have answered assuredly and quickly. Today I’d be more likely to say ‘I don’t know’ with just as much confidence.

Now older, wiser, but with just as much hair, I have over the years seen many people come and go. Clients, colleagues, bosses, company mergers, bankruptcies (thankfully not my own), through bull and bear markets, booms, crashes, and have seen my own fortunes fluctuate too before setting out on my own a few years ago.

Thirty years is a long time. The good news is it was all worth it.

The first thing to point out is I don’t have all the answers. That’s not what this post is about. I’m always learning. But I have benefited enormously from people sharing their time and expertise, so if I can help others in the same way, I’m happy to share what I’ve learnt also.

These are 30 observations, guiding principles, or simply things that work for me. Some of you who have followed me for a while will recognize many of them. These aren’t universal truths, they’re my truths, my beliefs, shaped by my experience.

And that’s probably a good place to start.

“The more you believe something to be true, the more you will have accumulated evidence to support it.”

That’s a quote from trading coach Van Tharp, and I’ve applied it to so many areas as a simple way of explaining people’s expression of their beliefs, my own, and the realization of how powerful confirmation bias is. Van believes we don’t trade the markets, we trade our beliefs in the market. A trading system therefore is simply a set of beliefs, and I think he’s right.

Buy high, sell higher.

Buying a stock at x+1 can be a lower risk trade than buying it today at x. Forget buy low, sell high. When something is falling, it’s more likely to keep falling than it is to reverse, and vice versa. It’s called momentum, and along with value, it’s one of the most empirically proven anomalies to academic theory that the Nobel Prize winners wish would go away. Note to self: Look into buying value stocks that show upward momentum.

Trade small to win big.

All traders and investors need trend and time to profit. Even if you don’t consider yourself a trend-follower, no matter what your timeframe, to make money you need something to trend, even if it’s just a couple of ticks higher, you need price movement.

If you are a long-term trader, time is also your friend. Time allows trends to develop, persist, and time in big trends allows you to trade in smaller size. If you are a daytrader, time is your enemy. The clock is ticking, there’s only x minutes left in the session. You need greater frequency of trades, or you have to trade in greater size and take greater risk.

It amazes me that newcomers to trading choose to start with an area that instantly requires them to either trade more frequently, or in greater size through leverage or margin. It should be the other way around. Only after years of experience and having amassed a fortune should someone attempt such a thing, but of course they don’t. A successful trader or investor will continue to do what made them that money in the first place, and it won’t have been daytrading. 99% of daytraders (a conservative estimate) are under-capitalized and would do better to build up their savings instead of daytrading them.

Limit orders limit performance.

I once worked for a PM who always put on limit orders. It was like chasing a bar of soap around the bathtub. Sometimes weeks or months later the order would still be on our desk, but the stock would now be way way higher. You either want to own it or you don’t. Is a penny here or there really the difference between whether you want to own it or not? Because your limit order is potentially making it exactly that.

I’ve held stocks for over a year and looked back at when I bought it. I could have bought it the next day, the next week, open, close, whatever. It wouldn’t have made a whole lot of difference. Unless you’re trading Cliff Asness/AQR size, for goodness sake, quit playing games with the HFT pikers. Just buy it and move on.

I have never found a way to consistently make money shorting stocks.

If you’re starting out, put this one in the ‘too difficult’ pile until you have the time, energy, or intellectual curiosity to tackle it. Just know that even amongst CTAs, even though they are long/short many different futures markets, the short side of what they do rarely makes much money overall, it merely helps them perform well during ‘crisis alpha’ periods of non-correlation, and smooths the equity curve longer-term, but the lion’s share of performance comes from the long side. That’s futures. Stocks are even harder.

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— The Option Specialist