Building Your Own Methodology: Start with Finding Yourself

You voted, I heard: "Gary B., let us know how to develop a trading methodology." Well amen, readers, amen!

You see, it wasn't long after I started penning Technician's Take that I realized in order to add value, the column couldn't be all about giving you fish. My columns on GBS Classic are fish. Tasty fish, perhaps, but still fish.

And while those columns offer some nourishment, you'll never be able to survive on them. Why not? Because the methods I outline simply aren't yours. They're mine: built for my tolerance, patience, risk adverseness and profit goals. They suit me perfectly; they might not suit you.

No, in order for you to develop as a trader, you'll have to learn to fish on your own. And that's what this series of "-able" columns, to be published each Monday for the next few weeks, is about.

OK then, let's start with the most important topic, trade entry. WRONG! Oh, that's right, the most important topic is money management. WRONG! Types of orders? WRONG! Profit taking? Stops? Shorting? Wrong, wrong, and WRONG!

Sorry, all these areas are important, but they fall far behind the important topic, and the one that might be the toughest to grasp: yourself. Yes, trading is the ultimate solo sport. You know the old saw: "There's no 'I' in team." Well, there's an "I" in trading, all right. A big one. And that "I" is the key to success. You must first understand yourself, your strengths and your weaknesses, and then build your trading methodology around what you learned. But if you skip the self-analysis phase, and simply copy someone else's method, you will ultimately fail.

Don't believe me? OK, then let me draw some analogies in sport, and specifically golf, because I know that area well. First, name any successful player who has copied another player's swing and strategy. That's right, you can't. No, every successful player has his or her own unique style. I mean, the fundamentals of golf have been analyzed and picked apart for decades, and trust me, there're no secrets anymore, regardless of what you read. Yet the swings and strategies of a Trevino, Nicklaus and Palmer are poles apart. Ditto for Snead, Hogan and Lopez.

Each one of these players first understood his or herself and then molded the game of golf around his or her unique outlook, temperament and physical abilities.

On the flip side, you know what happens to players who try to change their swing to match a "perfect" model, or change their style to emulate something or someone they're not? A decline, if not outright failure in the game. Example No. 1: John Daly won two majors with a let-it-rip, who-cares style. As an alcoholic, however, he had to reform and change. He did so, but in the process moved away from "free swinging" and into "subdued." His performance hasn't been the same since.

Example No. 2: Tom Kite, a player who had won more money than anyone in the history of the game, suddenly decided to change his swing to become longer off the tee. Tom Kite was a controlled, studious player, who had a superb short game. "Long ball" wasn't his personality. He never recovered.

The list is endless, by the way. Hundreds of great amateurs who chucked their own swing and approach as soon as they joined the professional ranks, and were instructed on the "perfect swing." The only problem: the perfect swing wasn't their perfect swing. And they failed.

The bridge to trading then? Identical. Name a great trader who copied another successful trader's approach and methods. Zippo, that I know of. Who can emulate Cramer to a T? Boy, I can't. Can anyone? How about Buffett? Simple style, right? Yet, every fund or person who emulates him ends up underperforming him over the long run.

So, if you're with me so far, and conclude that a key -- perhaps the key -- to successful trading is being true to yourself, how do you find out what "yourself" is like?

Next Monday, some thoughts from a clinical psychologist, plus some avenues to explore!