There are a lot of market junkies out there. These people love to trade, and most of them are not very good at it. Yes, they might make 100% gains or even 200% gains in a single year. But can they repeat that? Unlikely.

See, I have a repeatable process that cranks out modest gains, somewhere in the neighborhood of 10% to 15%, year after year after year. That is the benefit of having 23 years of experience.

Don’t get me wrong—sometimes I go big game hunting. And when I see potential big winners, I go all in. There were a lot of those opportunities in 2020. It was a monster year for me. Altogether I made around 40%. But I’ve had some bad years, too—like 2017.

As I get closer to 50, I’m also becoming more cautious. This is why banks hire young kids to trade and then fire them when they hit 47. They want people who are not afraid to take risks. But banks get hit with bad outcomes all the time. So, maybe they should hire more people with grey hair—or at least not fire them.

I have been a professional trader in one form or another since 1999—first at the P. Coast Options Exchange, then at Lehman Brothers, and then for subscribers of my various newsletters. There are some things you can only learn from time on the trading floor. I’ll give you some clues…

• Not all of your trades need to be winners.

You don’t need an .800 batting average to make money in the markets. You don’t even need a .500 batting average. You can be wrong on more than half of your trades and still make money.

I worked with a guy at Lehman Brothers who said he was wrong 80% of the time and right 20% of the time. And that guy made more money than anyone else on the trading floor. He was a stud. He made a lot of trades, and most of them didn’t work out. But the ones that did, he supersized.

It took me a long time to understand this. You want to lose a little, lose a little, lose a little… then make a lot.

One way to improve your odds here: Don’t try to catch a falling knife. Instead, if a stock is going down, wait for it to bottom, form a base, and turn up before you buy. This requires a lot of patience.

Another way to improve your odds is to look for cues in sentiment. When everyone likes a stock, it’s usually going to go down. And when everyone hates a stock, it’s usually going to go up. For example, if you see a company on the cover of a magazine, you can bet that stock is headed south.

Just look at Tesla (TSLA). The company’s founder, Elon Musk, was Time magazine’s 2021 “Person of the Year.” And Tesla shares have dropped 22% since Musk’s cover story was published on December 13.

• When you’re doing things right, 90% of trading is waiting…

Then 9% is research, and 1% is executing trades. It’s okay to get up and walk away from your computer. It’s okay to go play golf. You are not going to miss anything. And even if you do, you could not have reacted fast enough anyway. The computers are faster than you.

The only way to beat the computers is by thinking long term, which is something computers can’t do.

Jared Dillian