There is No "Holy Grail" in Trading

One Strategy to Rule Them All

In the early days of my trading career I recall brazenly telling all my work colleagues and friends about just how hard I was working to discover the perfect trading strategy. Regretfully, I now 'face-palm' myself for the sheer arrogance I had when starting off in trading and for falling into the holy grail syndrome trap. Bragging about how much I was making (and sheepishly sweeping losses under the rug), and being pompous about how stupid people were for missing the exponential opportunity that lay before them. The harder I worked, the more I was guaranteed in market returns. Or so I thought.

Somehow, I believed that sacrificing nights out, weekends away and human connection would help me find what is known in trading as 'The Holy Grail Syndrome'. This being, a strategy that would basically turn my trading account into the Federal Reserve printer and lift me out of mediocrity into the 0.0001%. More pain, more gain. Isn't that what we learn in school. There is absolutely no way that our school system could be wrong!

Reality Check

After 5 years of punishing myself, reading hundreds of books on trading, economics and finance, I soon discovered that the more I seemed to learn, the more confused and indecisive I became. My strategies became complex interwoven webs of technical analysis, indicators and financial jargon that served little more than a neat party trick to inform the less educated about trading. I Was 'that guy' at a party who wouldn't shut up about how much I knew about trading and investment, like a broken record. It became a circular and highly destructive pattern (habit). The holy grail syndrome is quite insidious.

The more I read, the less I understood. I then proceeded to do damage to my trading account. Thankfully not much.

Doubling Down

At this point, I had to double down on the learning. There must be something I am missing here! I started waking up at 5:00 AM, reading more, doing countless online courses and even reading the entire CFA curriculum. I could recite countless strategies, guess the market moves and be right most of the time. If required, I could spew out some proverbial garbage that we are spoon fed by the mass media on market movements. I truly struggle listening to financial media these days, what an absolute fear factory!

Let me give you an example: "The market has been consolidating well in 2019 back from the grips of a potential bear market caused by geopolitical instability and headwinds from trade embargoes between China and the US. The employment numbers are solid but we can foresee a high probability of recession within the next 18 months due to falling earnings growth and..." - Bullshit! Even if it's true, these people seldom make money in the market. They make money by marketing. It's one giant shill game.

Trading is Different From Real Life

What I am trying to say here is; even if you know every part of the market backwards, it does not guarantee you will make money. The rules of the market do not work the same as they do regular life. In life, if I do a poor job, chances are that I will be able to work harder and make a comeback. Even worse in many cases, I can do a shit job, and still be rewarded. Think back to that manager you didn't like - ever wonder how he got there?

There is a direct relationship between effort and reward in many cases. We also have support networks that help us perpetuate our self-delusion. Think "Honey do I look fat in this?". No sweetheart, being pregnant hasn't changed you one bit. Regular life is truly forgiving on the ego. We can lie to ourselves in all fanciful ways about our achievements and validate how amazing we are.

In trading the reality is different. If you are doing poor and hold onto losing trades, you simply get destroyed. If you feel the urge to work harder, you soon feel helpless as no matter how hard you work or feel like you are working, the market does not give a shit. You have no control on the outcome of the stock you buy to go either up or down. All you can do is make an estimated guess.

You could put all your money into one stock that turns out to be Amazon, where you did no work and gambled it all with huge profits, or trade using a mechanically sound system and lose 50% in a bad draw-down period. Does that mean gambling is okay? Can you imagine showing up to work and someone makes you the CEO fresh out of college? Or putting in 60 hours per week and hitting your targets to get fired the next day with no compensation?

We are dealing with completely different reward systems, our brains function very differently in this environment and it forces us to use what we know (work hard) to achieve the result (stock price appreciation) - but that's our assumption. The stock market truly does not care about our feelings, assumptions and guesses. It goes up and down. People either buy or sell, simple.

Different Rules

The rules are not the same. Rewards in trading are primarily random outcomes of which we have little or no control, no matter how we feel about it. Thus we are pushed into learning multiple trading systems, techniques and strategies with little or no time to reflect on how any of them are working. The reality is, all we can control in trading is where we buy something and where we sell it. It is that simple, but it sure is not easy. What we can control however is our psychology. How we handle the wins and the losses. the rest is down to raw statistics and some basic probabilities.

Really good trading involves a good plan, patience and discipline. To get to this point it's important to know where you are are in the learning cycle. If you think you may be suffering from Holy Grail Syndrome (HGS), tell me if this sounds familiar:

Holy Grail Questions you Need to Ask Yourself

1. Are you jumping from one strategy to another?
2. Are you able to clearly define your strategy? If yes, great, write it down. Compare that to your last 10 trades. Have you really been following the rules?
3. Do you have a growing library of trading books, some half finished, others you tried for a while and then moved on to another one?
4. What is the longest you've stuck to one strategy. How do you know it works? What evidence do you have?
5. Have you followed these strategies perfectly or deviated from them, have you documented this?
6. When trading do you feel like you can influence the outcome?
7. Do you care about being right or wrong? Does your strategy allow you to be wrong a lot and still make money?
8. Are you anxious when trading? When you are anxious are you following the rules?
9. Are you consciously aware you have fallen into the recurring trap of the holy grail syndrome?

The Answer

The questions above should give you a small jolt or red pill experience. Most of the people I coach and discuss trading with are chasing down multiple strategies, trading far too frequently and also taking trades that they knew were wrong - but did them any way.

If you have a growing library of trading books and never fully know when to buy a stock but end up justifying it one way or another, then you may have a case of holy grail syndrome. Trading becomes more like high anxiety gambling and losing money becomes commonplace. The biggest impact however, is mental health. If you are driving yourself nuts trying to get rich from the market, you will burn out and not experience the true joy of trading without fear.

I have been here and have huge empathy for this point in a traders development because it can feel debilitating. Almost like nothing you do is right and the losses keep stacking up. The cycle continues and strategies are thrown at the market at will. It's usually at this stage that people give up and believe that they can't trade or develop the skillet required to be successful at the game. This is garbage - you can be successful, you just need to do less to get more. Although you may not listen, experience will lead you to the following proposed remedies:

The Holy Grail Syndrome Remedy

If the above resonates with you. Here is what I would recommend. It might sound counter intuitive but bear with me:

1. Stop trading with real money if your strategy is confusing! You need to have a clear strategy, get in touch if you want some recommendations.
2. Take a look at your most recent trades. Have you logged them? What strategy are you running and can you be certain you are playing by the rules. Write down your rules, pin them to your forehead if you have to. This is a business, if you want to run a trading business then play by the rules.
3. Clearly write down your trading strategy. Make sure you only use one!
4. Similar to the above point, trade only one strategy when you start and become the master at it.
5. Trade small when using your selected strategy and don't take on big risks
6. Make sure that the strategy can work with your lifestyle. Take your time, the stock market isn't going anywhere.
7. DO NOT listen to tips or advice from friends on your trades
8. Cut out news and social media distractions. Do not make impulse buys on news.
9. Never act on fear driven from indecision.
10. Always cut your losses. No exception.
11. Understand the common pitfalls of the holy grail syndrome
12. New opportunities emerge every day in the world of stocks. If you miss a big move, or mess up loads of setups, do not give up. Learn
13. Keep a journal, log your entries, exits and why you took the trade. Write down how you feel after the trade. Reflect on this as much as possible.
14. Read more about psychology and philosophy.

The Real Holy Grail Syndrome Solution

There is none, however (did I scare you a little). There might not be a flawless and mechanical plug n' play trading system available but there is the next best thing. That thing is you.

Truly phenomenal trading happens when you realise that all trading results are directly your responsibility. This means that once you have found a reliable strategy with known positive expectancy it is up to you to steer the ship and buy or sell stocks that confirm to your trading rules.

I believe that this takes time and experience rather than information overload. Trading should be a fun, fulfilling and truth seeking experience that allows you to be wrong and still make money.

The solution to the holy grail syndrome of trading is self knowledge. That is, knowing what works for you, how you feel about your trading and being able to execute your system without fear.

If you are at the point in your development where you feel completely lost with your strategy, are stressed out from trying multiple systems and are gaining no ground at all, please get in touch. I've been there before and know the pain!

Reduce the input, stop focusing on the results and find a strategy that suits your personality. Stop listening to Gurus and looking at the Instagram profiles that stir your emotions - focus on you and what you want from trading.

“Be content with what you have; rejoice in the way things are. When you realize there is nothing lacking, the whole world belongs to you.” - Lao Tzu

Check out my other blog Conflicting Reality & Trading to get more insights into the trading mind.