If you’re reading this, it’s for 2 reasons…
1. You want to make enough money trading so that you can quit the job you hate and to tell your boss to shove it.
2. You simply want to use trading to make a few hundred extra dollars a week or day to supplement your income.
I’ve been trading more than 20 years and coaching traders since 1999 and can tell you that there are certain habits and skills successful traders use versus those who still struggle. Here they are…
1. Forget about high winning percentages. Unless a market has extreme volatility and follow-through, achieving a 80% and above win rate isn’t easy. Instead, aim for a 50% win rate and let money management take care of the rest. Any wins above 50% is just a bonus. By lowering your expectations you’ll remove the fear of making mistakes and as a result you’ll actually do better.
2. Pick 1 market setup and trade the crap out of it over and over again. Given enough time you can get quite rich by being a master of 1 simple strategy. Make no mistake, I’m not talking about getting rich fast but doing it steadily over time.
3. Keep it simple. The less indicators and EA’s you use the better the odds will be for you. The more clutter you have on the charts the more trouble you’ll have coming to a quick decision about whether to take the trade or not. This leads to confusion, indecision, missed trades and unnecessary losses.
4. Create a trading plan that fits your goals and lifestyle and stick to it as if your life depends on it. When you think about it, your quality of life does depend on it. Do you want to live in the penthouse or the poor-house?
5. Swing trading is the way to make the greatest profits with the least time involved. Would you rather make 500 pips a week day trading spending 8 hours a day staring at your screen or spend 20 minutes a day swing trading to earn the same amount? If you do want to day trade never spend more than 2 hours a day at it.
6. Being in a hurry to get rich will do only one thing… Make you go broke quickly!!! Slow consistent profits over time will add up through the power of compounding.
7. Don’t even bother to trade if you’re doing it because you’re under financial pressure and need the trading to dig you out of a hole. It’s puts incredible stress and pressure on you and will cause all kinds of problems which will push you even further from your dreams.
8. GET REAL! Trading is not easy and it takes several years to get really good at. You can’t earn a college degree or earn a vocation in a trade in less than 3 to 4 years and trading is no different. You can succeed but you need to be patient and have realistic expectations.
9. Risk management is everything. Never risk more than 1% of your account balance on one trade. This way in the unlikely event that you have 5 or 6 losses in a row you’ll be down no more than 6%. Your future financial success or failure will be in large part determined by this.
10. Trade management is the other major part of your success or lack of. Trade management is simply letting your winners run so that they are much bigger than your losers. Ideally you want to make at least 2 to 3 times as much when you win versus when you lose. This way you’ll always have a big mathematical edge against the markets.
IMPORTANT NOTE: Unless you are a total novice, you’ve probably heard in one shape or another many of the above but… If you’ve been struggling for consistency and profitability I can 100% guarantee it’s due to you not following any number of the above principles! All it takes is just one to totally derail your trading career.
Every week you should review this list and do a self-assessment to see which ones you’ve been doing correctly and which ones need work.
Even if you get on a massive winning streak, you still want to continue this weekly assessment as you’re actually more prone to making mistakes at this point due to over-confidence.
3 Reasons You Never Make Enough On A Trade
1. You’re a “Premature Trader”. What this means is that after you’ve done your analysis and entered a trade, the minute your up say 10 to 15 pips you get nervous and worry about giving all the money back so…You exit the trade to lock in the profits but… What tends to happen is that later on the trade goes up another 50 pips or more leaving you a major missed opportunity. This is a major mistake because banking another 40 pips or so would help smooth out any future losses. The solution to this is to simple have profit targets in place that can automatically take you out of the trade without you having to be at your computer. Some of the most famous billionaire fund manager’s only win 30% of the time but manage to hold on to trades that make 5 to 10 times more than they risked. Contrary to a popular trading idea that says, “You can’t go broke taking profits”… You actually can or at very least be stuck around breakeven or slightly in profit for a long time if you keep taking tiny profits.
2. You’re an “Over Thinker”. What this means is that you do everything right and get into a nice trade and sitting on 40 pips or more. As the market moves in your favor you keep focusing on all the resistance areas that could stall out your position and… As a result, you exit a trade at one of these levels convinced that the market couldn’t possibly move higher. Of course, what happens next is that you miss out on the big 200 pip move because you talked yourself out of how far the trade could go. You need to remember that all support and resistance areas can and will be broken at some time and there is no limits to how far a trend might go. The best way to handle this is to trade multiple lots and scale out 1 position at a time as you hit various targets or resistance levels. This way you’ll still be in the game when the big “Monster Trade” happens.
3. You’re a “Wishful Trader”. What this means is that you are blinded by making a lot of money so you tend to over-estimate how far the market will keep running. For example, you get into the trade and it’s up 150 pips but… You’re so convinced that it will hit a level 500 pips away that you don’t bother moving up your trailing stop to lock in profits. A typical ending for this type of trader is that they tend to give back a lot of their profits as they are so convinced of the big trade that they fail to see to warning signs that the market has run out of momentum. The simple fix for this once again is to trade multiple lots and scale out as you hit higher levels. This way you’ll lock in plenty of pips regardless of what the market does and… Every once in awhile your dream trades will occur…
Anyway, while this may seem like common sense, it’s actually something frequently missing from a trader’s mind-set.
I hope this gives you some food for thought and helps keep your trading account on a safe and profitable path!
Dr. Jeff Wilde