Thoughts on the quote: "The best trades work almost immediately."
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Much discussion happening nowadays around sideways markets. My system is in drawdown since April first week. The max DD so far is still under 7% but the time DD is the real test of patience. While revisiting some popular quotes by renowned traders, I thought of going deeper into the quote – “The best trades work almost immediately”. The thought of participating only in the profitable trades is very compelling but can it be practically done? Idea is to see how I can imbibe this philosophy in my system so that drawdowns are extremely small and the returns are generous.
Obviously, I put my AI companion to work. Here’s a summary (don’t worry, not AI slop) that may help trigger ideas for fellow traders.
Basic idea:
- Strong trades show urgency.
- Weak trades hesitate, chop, or reverse quickly.
- Capital should be concentrated in asymmetric moves, not in “hope trades.”
Approach:
- Use very tight initial risk
- Cut quickly
- Allow winners to expand
- Trail loosely after confirmation
Realistic Expectation:
Many small losses, few medium wins, occasional huge winners. A strong system might produce:- Win rate: 30–45%
- Avg. Winner <> Avg. Loser = 2:1 to 5:1
- Profit Factor: 1.5 to 2.2
Hidden Cost / Challenges:
- Noise / volatility spikes
- Stop hunts
- False breakouts before continuation
- Surviving psychologically - frequent scratches, repeated small losses, long flat periods, frustration
Practical ideas to tackle the challenges and make this approach work:
1. Two-Stage Entry Structure
- Initial probe position.
- Confirmation add-on later.
Example:- Enter 25–40% size on breakout.
- Keep wider stop than usual.
- Add aggressively only after expansion confirms.
2. Volatility-Based Stops Instead of Placing Stops at Obvious Locations
Using volatility-adjusted stops. For example, 1.5 ATR or 2 ATR
Indicators such as Supertrend / MAST / D-Smart can help. Combining it with the ‘two-stage entry structure’ mentioned above can be very useful.3. Time-Based Validation
For example, “If price fails to progress within X time, exit.”4. Re-Entry Rule
I think this is critical. Some of the biggest trends stop traders out a few times before exploding. Developing an objective method, and an open mind, for re-entry can be very helpful.5. Entry Location
Skipping entries when one is late and/or the trend is extended. Entering only when price is near/around volatility contraction, or after pullbacks and trend continuation pivots.6. Partial Stop Logic
For example:- Exit 50% on tight invalidation
- Hold 50% using wider structural stop
This is a good alternative to the first point "Two-Stage Entry Structure".
7. Market Regime Filters
Trading less during choppy phases is a very good advice but many times you only realise the choppy phase after the fact. A good market regime filter can be helpful to deal with this.8. Pyramiding into Confirmed Trends
The real benefit of this approach (very tight SL, trail generously) can be realised only when one makes the most of profitable trades. Pyramiding after the trade is in favour can be the key to making this approach very successful.Would love to hear more ideas, and personal experiences, from fellow traders. Thanks.
