Trade Like an Oil CompanyWhat can traders learn from an industry built around uncertainty? Drill for momentum.
Oil and gas companies do not expect every well to produce. They survey promising ground, drill controlled test wells, cap the cost of dry holes, and keep productive wells running. Momentum trading can follow the same logic: look for strength, risk little on each attempt, exit when the evidence fails, and give a real trend room to keep producing.
You do not need every well to hit
Exploration is a portfolio of uncertain attempts. A company can study the geology and choose a promising location, but it still cannot know what is underground until it drills. Trading is similar. A momentum signal identifies promising conditions; it does not guarantee what the next price move will be.
That changes the job. Stop trying to make every trade right. Instead, make each attempt small enough to abandon, define the failure point before entry, and avoid cutting a productive trend merely because it has already made money. A series of small losses is part of the exploration budget, not proof that the next signal must be doubled or ignored.
Trend following and momentum fit this model because their payoff can be asymmetric. False starts are closed by rule. Sustained moves are managed with trailing or opposite-signal exits. There is no promise that one winner will pay for every dry hole, so position size and aggregate risk remain the first controls.
That is the entire method of this site: survey, test, cap, and produce. Use simple rules to find momentum, spend little to test it, leave when the setup fails, and stay while the market keeps confirming it.
- SurveyFind a promising field. Look for measurable momentum or trend, not a story about what price ought to do.
- TestDrill one small well. Enter only when the written setup triggers, with position size determined in advance.
- CapAbandon a dry hole. If the setup is invalidated, close it. Do not deepen the loss to defend the original opinion.
- ProduceKeep a good well open. Trail the exit while momentum persists. Let the market, not a round profit target, end the trade.
Run every trade like an exploration program
The metaphor only matters if it becomes a process. These six rules turn it into decisions you can define, execute, and review.
Look for strength first
Use price, a long moving average, or relative strength to find markets already moving. The survey narrows the search; it does not promise a discovery.
Drill one defined setup
Wait for a written entry condition, then take a controlled position. Repeating one setup produces useful evidence; random trades produce unrelated holes.
Fix the test cost first
Choose the invalidation point before entry and size from that distance. One percent is a common example, not a guarantee or a universal prescription.
Close dry holes quickly
When price invalidates the setup, leave. Never widen the exit because you want the trade to recover; gaps and slippage can still make realized losses larger than planned.
Let strong trends run
Manage a winner with a trailing stop or opposite signal. Productive does not mean permanent; the same written plan that opens the trade must eventually close it.
Record every attempt
Track setup, entry, risk, exit, result, and rule adherence. Review the whole drilling program as a sample instead of treating one trade as a verdict.
The tools for surveying and drilling
The articles cover trend and momentum surveys, controlled entry rules, risk budgets, trailing exits, and the records needed to judge the process.
The 200-day moving average: the only trend filter most traders need
One line answers the most important question in trading: is this market going up or down? What the filter does, what it costs, and how to run it in twelve decisions a year.
Read the article → MomentumDual momentum: a complete strategy you trade once a month
Three ETFs, one comparison, twelve decisions a year. Antonacci's dual momentum may be the most strategy per rule in the public literature.
Read the article → MomentumBuying 52-week highs: the simple trade that feels wrong
Your gut says a stock at a yearly high is too expensive. Decades of momentum research say the opposite. Why new highs keep working, and the plain rules for trading them.
Read the article →The field manuals behind the method
Eight books on momentum, risk, probability, and discipline. Together they explain why a series of controlled attempts matters more than any single prediction.
The classic all-in-one foundation: psychology, charts, risk control, and record-keeping, written by a psychiatrist-trader who insists on discipline over brilliance.
View on Amazon →The definitive book on why traders with winning systems still lose, and how thinking in probabilities turns a simple edge into consistent execution.
View on Amazon →Schwager's legendary interviews with the best traders of a generation. The recurring confession: nearly all of them run simple methods with ruthless risk control.
View on Amazon →A hedge-fund manager publishes a complete diversified trend-following strategy: rules, results, and brutal honesty about the drawdowns that come with it.
View on Amazon →The complete case for the simplest serious strategy in the public literature: one momentum comparison, three index funds, twelve decisions a year.
View on Amazon →The deepest treatment of the least glamorous edge: expectancy and position sizing matter more than any entry signal you will ever find.
View on Amazon →A famous fund manager reduces value investing to a two-factor formula a teenager can run, and explains why it works precisely because it's hard to stick with.
View on Amazon →The 1923 classic on Jesse Livermore. A century old and still the best book ever written about sitting still while a trend pays you.
View on Amazon →