The 3-Step System to Build a Profitable Trading Strategy - Trading Coach Podcast 1312

Ajouté : 2026-05-07

[00:00:00]Today we're talking about trading strategies, how to find the right fit, how to refine your rules for optimization, and most importantly, how to tell if your results are actually credible or just fooling you. Hey guys, Kill Stokes here. Welcome back to another episode of the Trading Coach podcast. We are back on video again today and I've got a feeling a lot of our summer episodes will be like this.

[00:00:22]So, if you're listening on the audio only version and you want a more engaging version of the show, make sure you head over to YouTube as well, where I also share a lot of content dealing with technical analysis and charting stuff and you know that type of pizzazz, whatever you want to call it. Now, today's topic actually comes from a YouTube comment and I want to kick things off by sharing it with you. Our trader asks, "I have a big question."

[00:00:53]Mr. Achille. Mr. Aquille. No, just Achille. Mr. Aquille sounds old. That's my dad. My dad's name isn't Achille.

[00:00:59]It's Wayne. So, Mr. Wayne would be his name, but you guys get it. Anyway, Achille, I created a strategy, an aggressive one, um, that focuses on trends. I back tested over a 100 trades going back about 5 years, but it only had a 34% win rate. I wasn't comfortable with that. So, I reviewed the data and I added confirmation rules that eliminated about 40 trades, but I now have a 49% win rate and 21% break even rate. My question is, can I now say that this strategy has an edge with only 60 trades or should I go back to 100 trades before making any conclusions? And I think this is a great question. And instead of jumping straight into the answer, I want to use this as also an opportunity to walk you through the three main phases of strategy development. Learn, test, refine. Don't know why I used two hands cuz I just did it on one like this.

[00:01:56]Anyway, learning.

[00:01:59]Everything starts here. Knowledge, knowledge, knowledge. Before you ever even think about a trading strategy, you need a solid understanding of technical analysis. Both the fundamentals, not the fundamentals like news, but the fundamental elements of technical analysis or as we call them, the foundational elements. But beyond that, you also need to understand the specific rules of your trading strategy. And here's where a lot of traders get it wrong. A lot of traders think that trading a strategy or picking a strategy is simply grabbing something from a book. Going to grab a random book. There we go. Uh and dealing with it or running with it. But in reality, you need to make sure your strategy checks a few boxes. First, it has to be doable for you, right? Just because someone else can trade a strategy doesn't mean that you can trade a strategy. At least not just yet. Remember, your knowledge and your skill level matter. And yes, they both should grow over time. But at the beginning, you're not going to be here, you're going to be here. So, you want to find something that you can actually find and execute consistently. This reminds me of when I was younger and I was playing basketball, right? I used to try all these flashy moves, right? Spin moves, behind the back dribble, between the legs, all the stuff I saw on the N1 mixtapz. The problem was I would lose the ball every time. And eventually a coach would come up to me. He said, "Hey, Akquil, how about instead of trying all that fancy stuff, you just practice dribbling with your left hand."

[00:03:34]And he gave me a a task. He said, "Go outside and dribble for like 10 minutes each night with your left hand." So, of course, in a keel overwork fashion, I did it every night for 20 minutes, annoying the hell out of my family and neighbors. And after doing this for months and months and months, I came back and I tried all those fancy moves I was doing before and I can actually pull them off because now I can dribble with both hands instead of just one. All that to say, right, one of my favorite sayings, the advanced is nothing more than a mastery of the basics. And it's no different in trading. I actually went through the same thing in my trading career as well. When I first started off, I wanted to be a priceaction trader, but I wasn't skilled enough or disciplined enough to do it. So, I failed and I failed a lot. So, although I did eventually pick something price action based, I had to start with something that was technically price action based, but a lot different than what I intended on trading. Now, you fast forward 19 years later and I'm trading now the exact same way I wanted to trade way back in the past, but I've got a lot more experience and a lot more skill now. So, I can finally do the things that I wanted to do back then.

[00:04:45]Same goal, just different timing. I had to grow up. Secondly, to the deuce, your strategy has to fit your lifestyle and your schedule. If your strategy requires uh checking the charts every 15 minutes, but you've got a full-time job that doesn't allow that, then you got a mismatch, right? You're not going to be able to do it. I'm not going to be able to do it, right? Um old school, what ' 80s, '90s hiphop, whatever that was.

[00:05:11]Anyway, focus a kill, lock in. If that is the case, you're going to have to adjust your strategy. You can do things like, "Hey, I'm going to do the same strategy, but maybe do it on a different time frame, one that you're actually able to do, or make tweaks or pick something else that actually aligns with your life." Now, third, you've got to actually like your strategy. Now, I know what you're thinking, Akquille. You read your trading plan to us in a past episode and one thing you said is that at the end of the day, trading is your business and you are in business to make money. So, what's love got to do with it? What's love got to do with it? Got to do with it. I'm in a singing mode today. Anyway, that's that's a fair question, right? I am in trading to make money, but here's the truth and and you should be as well, right? Um, the truth is this. The trading journey is tough.

[00:06:03]It's stressful. It's painful and there are periods that feel like you're walking through absolute hell. Imagine you are just sort of the trailer for the Odyssey. That should be what trading is like. You are gone for a long period of time. Your your loved one thinks that you will eventually make it back, but you've got to fight all these gods and demons and warriors just to get to break even. Right? That is pretty much what the trading journey feels like. Jason and I should do a uh we should do a promo video for our next live event uh dressed up like the people from the Odyssey and just you know battling different trading demons. Let me let me write that down for uh future ideas. Uh anyway, if you do not enjoy what you're doing at some level, right, money alone, the motivation of money alone or making money alone, it won't be enough to keep you going. Trust me. um you'll quit and go to the next thing that can make you money quickly. Or if you do like trading but maybe not the strategy, you'll just crumple that strategy up and move on to the next one. And the cycle continues.

[00:07:09]Now, this brings us back to our trader question. And one of the key things that I saw in his um the question or comment, whatever it was, he said that he did his testing um 100 trades over 5 years and his strategy returned a 34% win percentage, which wasn't to his liking.

[00:07:27]And let's be honest, or be honest with yourself, it's probably not to your liking either. At least not immediately.

[00:07:36]But something that would make me assume, I don't know, and I'm not going to pretend to know, but something that would make me assume that this trader is actually in love with his system is that instead of crumpling it up and throwing it away, something made him go about refining it instead of just abandoning it. And this something was again that he actually liked his strategy. Love makes us do crazy things. I won't bore you with other analogies from past relationships, but yeah, it does. And I've bet you have a few crazy love stories as well. All right, next phase, testing. Now, I've done plenty of uh podcast episodes and videos on back testing, so I'm not going to dive into too much detail on that. If you want more, just go to the Googler or the YouTuber and enter a Keel Stokes back testing and lots of things will sprinkle down giving you knowledge to uh acquire on that. But here's one key idea that I want you to take away. Back testing isn't just about collecting data. It's more of a creative process, right? It's about discovery, right? both from a quantitative perspective, the collection of the data, and from a psychological perspective as well, testing yourself through the ups and downs of going through lots and lots and lots of years in the market. And if I can give one bit of advice to you guys, it would be this.

[00:09:01]This this may be a a good quote to write down. I'm feeling good about it. When you're doing your testing, just don't look for the answers.

[00:09:12]Look to find the questions.

[00:09:16]Maybe that wasn't as profound as I thought. In my head, it sounded a lot better, but it usually doesn't work its way out that way. Anyway, asking the questions is important because that's what brings us to our next stage, which is the refining stage. And this is where the magic happens, right? This is what our trader did where he added confirmation rules to his entry and was able to improve his win rate and turn many of those leftover losers into break even trades. And that's what it takes to be a successful trader. Something that many traders think is that strategies are just plugandplay. Again, I find the book, I find a YouTube video, and I find a strategy, and boom, I don't have to do any work. It it's it's good. The honest truth is they're not meant to work perfectly right out of the box, right?

[00:10:00]Most strategies have a starting point that has a very very very very small edge and it's our job as a trader to refine and to optimize that strategy to increase the edge based on our personal liking. Think about it as being very similar to like um uh Formula 1 racing, right? In Formula 1 racing, right, all the cars have to follow these strict regulations. I think uh what the the engine, the shape, the size, all that has to be the same. But within those regulations, the team still have the ability to tweak and adjust certain things on that car in order to maximize performance. And this is what we're doing with our trading strategy. We are taking something that has a little bit of an edge that works and we're tweaking it to make it work in the way that we want it to work. Whether that's higher win percentage, whether that's higher riskreward, whether that's higher frequency, lower frequency, too many variables to talk about. So now, let's get back to our big question, and it pretty much was, can we trust a sample size of 60 trades right after it was taken down from 100 over a 5-year period? And before I answer, I want to share what you guys said over on the YouTube community poll. So, drum roll, please.

[00:11:20]73% of you said that 60 trades, come on, over five years, come a little closer, is dramatic pause.

[00:11:32]Not enough.

[00:11:34]You can back up now. And generally, I would agree with that. Now, from a statistical standpoint, that's a lot of S's in a row. My god, I can't believe I nailed that. When we're doing surveys and collecting sample sizes, and this is leftover random knowledge from college when I did a lot of work on data acquisition and stuff like that, you generally want to have about a sample size of 350 to get like a solid solid result. With that being said, it's also generally thought that if you can get a sample size of 100, that is considered to be a meaningful result. And that's what I carried over into my trading for my, you know, personal requirements when I test and that's what I tell the traders that I work with as well. Now, with that being said, I also like to add a time component along with that. So, um, along with the minimum of 100 trades, I also say look to do your research over a five or 10year period depending on the time frame in which you're trading on. Now, why is this time period important? Well, for two reasons, right? Not all strategies have high frequency, right? So, and and frequency is the amount of trades that are taken, right? Some trades are far and few between. So, hitting a 100 may be unrealistic. It may take time. More importantly though, over that certain period of time, what you want to see is you want to see how your strategy deals with exposure to different market conditions. Because contrary to popular belief, the markets do change. We have high volatility markets, we have low volatility markets, we have trending markets, we have ranging markets, we have geopolitical events like what's going on right now. We have economic and political shifts, we have pandemics, unfortunately, right? Your strategy needs to thrive or maybe just survive in all of those environments, not just one.

[00:13:32]And I've witnessed a few war stories in my coaching career and one of them came from a trader who had a trend trading strategy and it worked beautifully in the trending markets. Now this trader did not test over a long enough period of time. They just tested a very specific period of time and that strategy was amazing. They did really good for a while and unfortunately there came a time where the market conditions changed and for lack of a better term their strategy got ripped to shreds and because this trader didn't learn those foundational elements. They weren't someone that learned how to trade. They didn't understand technical analysis.

[00:14:11]They just found the book. What is this book? Imperial Life in the Emerald City.

[00:14:16]Not trading related, but I grabbed it.

[00:14:20]Naked Forex. They found the book. There we go. And just traded a very specific Sorry, I'm not even looking at the camera here. Um, they just traded a very specific strategy from it. They didn't know how to make any adjustments when their strategy started failing. So, in instead of being able to identify what the problems were and put together solutions to fix those problems like most professional traders do as market conditions change, they were stuck on that boat. And if this boat is my Everton Cup and the conditions were the last eight minutes or six minutes of stoppage time in yesterday's game versus Man City, they just went down with the ship. We were so close. Freaking Doku.

[00:15:11]Anyway, I had to take a break cuz I was frustrated. They blew their account. So, my final thoughts are this. Um, my ending bits of advice. I would certainly advise our trader if possible, right?

[00:15:22]Again, I don't know the details of the strategy to try and get to a 100 trades.

[00:15:28]Um, it's going to take a couple more years of testing, but that's just more reps, more data in the market. It's always better to do more work up front that you can do less work later. Um, with that being said, if this strategy does have a very low frequency and they just can't realistically get to 100, I don't think 60 is a bad sample size. So, it's something you can definitely trust.

[00:15:52]It's not like having a sample size of 10 and making assumption off of that. Um, I think 60 is something that's trustable.

[00:15:58]I just think 100 would be more trustable. I'd be able to sleep a little bit better at night, but that's just me.

[00:16:05]Anyway, I'm fired up now again talking about Everton, so I'm going to end it for today. Plus, I got Champions League to watch. Um, if you enjoyed this episode, make sure you like, hit that subscribe button. Again, it is summertime. My schedule is freed up, so I'm doing a lot more content on a regular basis. So, make sure you watch this space for all types of cool stuff.

[00:16:24]And as always, plan your trade, trade your plan. Good luck in the markets. And yeah, go Everton. I don't know, whatever.