Trade like you're drilling for oil

The premise: exploration, not prediction

Oil companies do not know which well will produce before they drill. They improve the odds with surveys, limit capital committed to each test, abandon wells that do not justify further spending, and continue operating the wells that produce. A momentum trader faces the same uncertainty in a different field: the signal finds a promising location, but only the market can reveal what happens next.

The objective is not to make every trade right. It is to run a repeatable program in which failed attempts are controlled, aggregate exposure stays within budget, and a sustained trend is not cut short by impatience. Seven steps turn that idea into a written process.

Step 1: Survey for a documented source of strength

Start with a measurable condition rather than a prediction. The methods covered here use trend following (the 200-day filter, the golden cross), momentum (52-week highs, dual momentum), or plain structure (horizontal levels). Choose one defined approach first. One market, one setup, one timeframe makes each attempt comparable to the last.

Step 2: Write the drilling plan on one page

Before committing capital, define where you may drill, what triggers the test, what invalidates it, how much it can cost, and how production eventually ends:

Step 3: Set the cost of each test before drilling

The 1% rule is one common example of a fixed risk budget, not a promise that losses cannot exceed it or a suitable number for every trader. Decide the invalidation point first, calculate size from that distance, and count correlated positions together. Gaps, slippage, leverage, and liquidity can make the realized loss larger than the plan.

Step 4: Wait for a survey worth testing

Daily and weekly charts can reduce short-term noise and unnecessary decisions. The point is not that slow is always superior; it is that the timeframe must match the strategy, available infrastructure, and life of the person expected to execute it.

Step 5: Keep a field log for every well

Seven fields, two minutes, a spreadsheet. Record the setup, entry, planned risk, exit, result, and whether the rules were followed. Without the field log, dry holes become excuses and productive wells become stories instead of data.

Step 6: Review the field, not the latest hole

Review execution and manage exits on schedule, but evaluate the method over a series of comparable attempts. One failed trade does not disprove the setup and one winner does not validate it. Change rules only with a written reason and enough evidence to separate a pattern from ordinary variance.

Step 7: Grade the process, not one discovery

A short run of profit or loss can say little about process quality. Rule adherence, planned versus realized risk, and exit discipline are measurable on every attempt. Judge the strategy with a meaningful sample and appropriate costs, which is the probability-first argument of Trading in the Zone.

What to delete

Simplifying is mostly subtraction. Safe to remove today:

• Every indicator past the second. They're all transformations of the same price series; the third one is décor.
• Financial news during market hours. It's entertainment engineered to feel actionable. Your system doesn't have a "pundit" input.
• Other people's live trades. Signal groups and chat-room callouts are how you end up trading fifty systems badly instead of one well.
• The four other strategies. Archive them. They'll still exist in a year when you've mastered the first.
• Leverage you don't need. If 1% sizing says the position is small, the answer is a small position, not more margin.