What separates good traders from great traders? This is the golden question that everyone wants to know. I will take my best shot at answering it in this blog post based on the years of experience I have of only being good. That last line was tough for me to write but it is true. There is a reason that I have been just good and it really has to do with many factors that boil down into 1 single aspect. I will get into that aspect and the traditional plans to improve upon it shortly but first I will say the traditional methods of getting better at this one aspect do NOT work for me or at least haven't to this point in my career. It is not due to a lack of desire or want because I have put countless hours into this and will put countless more in before I am done. I WANT to improve which is half the battle. The other half is easier said than done. My problem is arguably also the one thing that has kept me in the game late last year. Risk Aversion. 

One would think that after years of doing this, I would have improved upon this by now. In the spring/summer of 2020 I started to improve but I quickly took steps back. Then I had my large loss and saw my account value plummet which I discuss in a prior post. I was then in rebuilding mode. Now, 1.5 years later I am back to a point at which I can start to size up again. Except this time I plan on doing things a little different.

Ok so now that we have covered that, you are probably saying to yourself please just get to the punchline of what separates good from great. I hinted at it but here is the money ball: From all of my experience, the one thing that separates all of the greats from me is their ability to size up responsibly and truly compound growth. This is such an overlooked part of trading but after you have found setups that work, it becomes the one thing left to master. 

Here is how most go about it and how I have in the past, some of you may be able to relate. So it starts by trader X finding his niche. He starts by taking 1000 share positions and is fairly comfortable with this size. Once he is okay with that size he may double it and start taking 2000 share positions. One size fits all approach. After doing this for some time and getting larger and larger positions trader X suddenly gets stubborn on a trade, refuses to stop out and at his largest size he has ever taken, eats a huge loss that wipes out months or maybe even a years worth of gains (if not blow up altogether). Without putting much thought into the approach of sizing up, this seems like the logical way of doing it -except for the blowing up part. Slowly scale up, take even size across the board on every setup and slowly get larger. After Trader X takes the large loss, his confidence is shaken and he sizes way down which negates everything that he has worked for the past several months/years. There are some obvious flaws with Trader X's risk management however this also ensures that Trader X will never grow exponentially. 

If one were to take a look at Jackaroo, Tim Gritanni, Huddie, any of the greats that have come through in the past 7 to 10 years you would realize a few things by looking at their profit chart. 1.) They grow exponentially - they start flat for a long time and then boom, takes off like a rocket ship. 2.) Their drawdowns are fairly muted in the grand scheme of things. Yes, they take giant losses compared to normal people but they have earned the right to take those loses which brings me to my next point.

Ok so the big reveal was sizing up, big whoop right? That still really means nothing to you in terms of helping you improve or it may mean something to you but not what it should more than likely. Let us fix that. Let us get into the details of their approach.

Huddie talks about a period in his trading career often which he has named operation 1K risk. This is a time when Tim Gritanni mentoring him told him that he needs to risk 1K on his A+ setups at ALL times. What does this mean? This means that when one of Huddie's known profitable patterns came up, he was to 1.) pick an IMPORTANT risk level on the chart, 2.) Pick an entry that makes sense given that risk level and 3.) calculate his position size based off of risking 1K. Let me give an example to further drive the point home. Huddie sees one of his bread and butter setups come up and decides a good risk level is 1.00. That means that if the stock breaks the 1.00 level he will stop out of the trade and cut his loss. He then picks an entry that makes sense and lets say that he gets long at 1.10. He is doing operation 1K risk meaning that when he stops out at 1.00 he needs to have enough size on to lose 1K on the trade. So he needs to take 10K shares. This means that when/if he has to stop out at 1.00 he would lose 1K. 

Now Huddie did not start at this point. He had worked years to find patterns he knew well and were profitable. He took things slow. Slow enough that he got to the point where Tim G was telling him, "hey man you are good, you are at a point where you have this figured out now SCALE!". Huddie did just that and needless to say operation 1K risk was a smashing success (just go look at his Profitly chart.)

Now back to me to wrap up. This approach is what I need to take moving forward. I am officially kicking off operation 1K risk. For all 5 of you that read this and for the 3 that actually get to this point, please hold me to this. if you see me taking losses anything less than lets say 800 or more than 1200 than something has gone wrong and I have broken my rules. I am going to setup a system to where I will either lose 1K or have an equally large or larger win. 

So I will close by saying, anyone struggling with this themselves. I encourage you to take a similar approach. It DOES NOT NEED TO BE 1K. Remember I said you have to earn the right to size up to this risk. It could be operation 100 or operation 500. Whatever it is, I encourage you all to look at growth as a function of risk and not a function of position size. 

At then end of the day it is all about slowly expanding your comfort zone so that a large loss is not large relative your account size or your recent gains. If you are comfortable risking 100 right now, try 2 weeks risking 150 or 200. Then maybe do 300 after a few more weeks/months. Slowly scale up and push yourself. It is not going to be super comfortable (that is why its called stepping out of your comfort zone) but it will not be as jarring as risking 2X what you used to risk and taking a huge loss that you aren't ready for. I will leave you with a nugget of wisdom from the great Jackaroo when I asked him the question about how he was able to size up. He said, man you just have to Nut the F* up. Here is to you Jack!