June 27, 2015 – Reflections on Jeff Cooper’s Hit and Run Trading System

Written around 5 years ago during my Citisec days.  I just digitized it here.

Nikki Yu

“Our job as traders is not to call the market, but to interpret the setups that have an edge.  Our job as traders is not to make money, but to follow the rules step-by-step and take the setups day-by-day and the money will follow.  It’s all about interpreting the price action and the markets mosaic day-by-day, piece-by-piece. “- Jeff Cooper, Preface of Hit and Run Trading.

A good trader spots an opportunity, triggers the buying, consciously knows where he’s going to be selling, and where he’ll get stopped out of his trade.  Also, even when the stock is going in his favour, he doesn’t second guess himself on why he just has too few shares.  He consciously makes it a point to buy the proper position size.   When he deviates by buying more than he should, he will only lose tomorrow what he has profited from today.  Being inconsistent could do well in a few lucky trades.  (It’s still luck because even the strongest setups have a 60-40 batting average), but as time passes, the superiority of your system will only matter if you can continue doing what you should be properly doing every single trade, every single day.  


Cooper’s system allowed me to be consciously aware of my faults.  If I don’t make money trading Cooper’s system, I realised it’s mostly because I added a position which was 3-5% higher from my original entry price the second day.  I get excited adding more to my winners, thinking that the stock I have is outperforming a down trending market.  When my stock rallies, I get greedy (thinking I’m riding a winner), only to see the stock succumb to the falling market, with liquidity evaporating a potential 7% gainer into an almost 2% scratched trade.

I believe the frustration of every trader has to do with having the ability to find the stocks with the proper setups, and having the plan to trigger, but not being able to choose the one that flew high up above.  It was in the trader’s plan.  It was in the list.  Either I bought it, but isn’t choose to hold my other half.  I didn’t buy the stock on my list, because I already bought the other stocks (thereby having too much risk exposed.) I failed to follow my proper stop, selling earlier due to market conditions rather than the stock’s price action itself.  I failed to be patient and allow the stock some room to breathe.  I failed to sell a stock that wasn’t a winner the day I bought it (even if it didn’t hit my stop on that day, I realised that the stock will just tie up my money or eventually hit my stop the next few days.)

The hardest part for me is sticking to Cooper’s system when the market is falling.  What I’ve realised from my trading is that when the market is sideways and consolidating, Cooper stocks with strong setups will outperform the market, but hit ratios fall tremendously in a downtrending market.  From having a 60-40 or 50-50 batting average, you’ll only have 20% winners and 80% losers.  I don’t know if I should modify and just let Cooper’s trading signals go when the market is falling.

In any scenario, Cooper’s system helped me to realise that following rules and having a structure will ultimately lead to profits in time.  Most traders know how to say that consistency is the key, but I’m not sure whether everyone really pays attention to getting Cooper’s 1 point profit whenever he has it every single day or rigidly following the rule of selling the losers every day.  Trading is a probability game.  You try your best to follow your plan, and even if it results to losses, at the end of the day, one trade is just part of a series of trades a trader will make.  If he sticks to a superior system, his edge will come out eventually.  This is the only reason why I think I still can beat this market in time.


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