What Really Matters in Trading Success
I am in a fortunate position that I speak to many traders during the day. I have a large variety of traders, from old timers like myself as well as many new and aspiring traders who want to improve their trading results. What surprises the new traders is the fact that trading indicators or trading systems do not make successful traders. Only the experienced traders know that trading success is based on how the trader thinks & their trading psychology.
Many of the new traders are not interested what so ever in psychology. This is a grave error.
More so many new traders think they do not need a trading plan. Without a trading plan that fits your own personality one is merely gambling. This trading plan needs an edge. An edge does not necessarily mean complicated. I have met many successful traders who consistently trade the same setup for years. These traders understand that any trade is 50/50 and try to keep their losses small. They basically are consistent and think in terms of the next 1,000 trades. They are good losers. They do not get upset when trades do not work. They have no issue putting on the next trade. They understand that trading is simply a probabilities game. They worked hard at trading by putting in countless hours in developing their trading plan. This is the key to their success. The actual trading itself is rather simple.
Successful traders have that Mental and Emotional Control regardless if trades are working or not ( losing or making money…want to point out my wording…Words have power!).
Success traders manage the risks to avoid failure and pain. In one of my books..The Bible of Trend Following a comment on Amazon was that I was trading too small and was not risking enough money. As I stated prior, I am trading my risk personality. I have seen many traders blow up by trading too large. I risk less than 1% of my account size on any trade and even have a trading program in which I risk 40 basis points. I attempt to avoid pain and failure…however we are dealing with uncertainty and there are no guarantees with any program. Learning to position size is one of the most important lessons of being a successful trader.
I have the discipline to follow my trading plan. As much as the last several years have been one of the longest draw downs I have ever experienced…I am a Confident and Independent trader. Successful traders know they must be persistent and that trading is never easy. I always say that trading is a marathon. There are always losses and draw downs. You have to be a good loser. Just have to “try” to keep the losses small. You must be patient with winning trades and impatient with losing trades.
Realize there is only 4 possibilities when we trade:
1 Big Losses
What has happened in my trading since 1994. I “try” to avoid big losses..but you can not avoid gaps or limit moves and you will experience losses greater than you expected..most trades are small profits or small losses which cancel each other out…and only in rare times do I “stumble” into a big winning trade. I never know what trade will work.
Again…Be Consistent and Persistent!
Comfortable trades are usually losing trades while the more uncomfortable trades are usually the winners.
Emotions are dangerous masters to the trader. You have to evolve as a trader or eventually fail. It is not the news but how the market reacts to that news.Learning through mistakes.
Passion for trading is the tool needed for eventual success.