Having only one path to success sets you up to lose, not win. Rather, a good plan provides many avenues for success.
Imagine you have your heart set on marrying a specific person. What happens if that person leaves you? Or doesn’t share your feelings? A better plan would be to marry someone smart and beautiful who loves you. That way you have plenty of options open to you!
Similarly, in trading, if you are relying on one trade or one strategy to achieve your goals, then you leave yourself exposed to the failure of that trade or strategy.
Instead, if you want to succeed, set yourself up with numerous ways to achieve your desired outcome.
Be like Ray Dalio
Ray Dalio runs the world’s largest hedge fund, Bridgewater. Do you think he is relying on one trade, strategy, or even person (including himself) to achieve Bridgewater’s goals?
Of course not. Bridgewater runs several funds across multiple markets, strategies, and traders, all universally tested to fit the funds principles. If Dalio went on holiday for the year, the firm’s organisational culture would keep the returns ticking along nicely.
You may not have the resources of Dalio, but you still need to think like him if you want to sleep easy at night.
How to achieve your goal “robustly”
Let’s say you need to make 20% this year. You want your plan to be robust. A robust plan means it can survive all manner of challenges and still come out on top.
So rather than simply hoping your strategy performs this year, think broadly about your goal:
- What other strategies do you have and can they build a return of 20%?
- What market types don’t you have strategies for that you can develop?
- Can you add different timeframe (day, swing, position trading) strategies?
- What markets can you add to your existing strategies?
- What trading processes can you improve?
- What other systems do you have access to that you can allocate funds to?
- What new opportunities do you see ahead this year that you can capitalize on?
- What information do you need that you don’t currently have?
- How can you make your trading more systematic or automated, freeing your time?
- What are your weaknesses and how can you outsource them?
- Who do you need to add to your trading team? What skills do you need to add or develop
- What other income sources can you create?
Put it this way, if you build a trading business with ten different strategies across a variety markets, including diversification across traders and tightly controlled risk, and all are targeting expected returns of 20-30%, are you setting yourself up to win or lose?
Note: I am not suggesting that you go and try to build ten systems at once. Rather, when you know how to trade and have a set of working principles, start building a proper trading business that is diversified across strategies, markets, and people.
About the Author
Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is the owner of www.fxrenew.com a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.