A successful trader is not a trader who has made a lot of money in a short amount of time because he was just lucky. Rather it is a consistently profitable trader who makes money in the market year after year, which makes him successful.
After reading many books and communicating with many successful traders, I have noticed that they all follow certain principles in their
trading. It doesn’t matter whether the trader is a scalper, a dater or a swing trader – these principles are still maintained.
Thus, if you want to become a profitable trader, it means it makes sense to learn and follow certain principles.
Always use stop-loss
Trading without a stop-loss is like playing Russian roulette. You can trade like this for quite a long time, but in the end you will lose your entire deposit.
I remember how many years ago I had a long position on EUR/USD. I didn’t use stop-loss and thought of getting out of the deal if it would be obvious that the price would go against me. Once there was a big holiday, but I could not enjoy it, because constantly thinking about my deal and worried about it. The price started to go against me, and I was not at this time near the computer. In the end, I closed the deal with a big loss. This failure spoiled my holiday and taught me an important lesson in trading – always use stop-loss.
Stop-loss is your insurance and peace of mind. If you trade without stops, you do not know how much you can lose, and will be constantly in a state of anxiety and uncertainty. Believe me, you don’t need that at all.
Risk only a small part of your capital
Successful traders know that trading success is not determined by multiple trades, but depends on the next 10,000 trades and risk for each open position.
You may have a trading strategy that makes a profit in 70% of the time, but if you risk 50% of your deposit in each transaction, your risk of losing all the money is predetermined.
Did you know that all casinos have certain betting limits for each table? The casino risks only a part of its capital at every stage of the gambling game. Their advantage over the players is no more than 2-3%, and if they risk 20% of their capital in each game, their risk of ruin will be inevitable.
A successful trader tends to trade in the market for as long as possible. If you can stick to moderate risks, then you will be able to hold out on the market for a single year.
You need a profitable trading strategy
When you have a profitable trading strategy, it means that you have a positive expectation to make a profit from the market.
Positive Expectation to Make a Profit (Probability of Profit- Average Earnings) – (Probability of Getting a Loss – Average Loss)
It took me years to learn how to make money from the market. I was like most traders, constantly staying in search of new trading strategies on forums and testing them. After one failed strategy, I moved on to the next one, and it was repeated over and over again.
The harsh truth is that 95% of all trading strategies posted on the Internet are completely unprofitable. Now you should understand why 95% of traders cannot make money in financial markets.
You can stick to the ideal risk control, you may have the perfect trader psychology, but without a lucrative trading strategy, you will still lose out in the long run due to spreads and commissions. So you need to find your trading style and your strategy, which will have a positive expectation to make a profit.
You need a trade plan
All successful traders have a trading plan that matches their individuality. The trading plan helps you stay objective during trading and prepares you for possible price movements in the market that may occur. Your trading plan should answer the following questions:
- How much do you risk in each trade?
- Which markets do you trade in?
- How do you open your trades?
- When will you close the deal if you’re right?
- When will you close the deal if you were wrong?
Trade on trend
This may not apply to all traders, as some of them are successful, despite the fact that they may not necessarily trade on the trend. But most successful traders associate their trading with the trend.
Imagine that you are on the high seas and swim against the current. It will be very difficult for you to swim from one point to another if you are moving against the current. But it will be very easy for you to move from one point to another if you are adrift.
Trading on a trend is similar to swimming on the high seas: you need to go with the flow to pick up as many points of price movement from one point to another.
Have a solid character
Trading is one of the toughest things you’ve ever been through. The market doesn’t care who you are. If you don’t follow the rules, it will take your money away from you.
There are many trading rules that you will only learn about after a few years of trading if you only last so long. This is why solid character and tenacity is the hallmark of all successful traders.
In Jack Schwager’s book The Wizards of the Market, we can read about trader Martin Schwartz, who became successful only after 9 years of trading in the financial markets. Or Michael Marcus, who managed to multiply his company’s account by 2,500 times. Tony Saliba, who lost almost his trading capital in six weeks and then earned for 70 months in a row. We all know about Jesse Livermore, the most famous trader who went bankrupt several times, but each time returned to the market and made money, earning 100 million dollars during the Great Depression.
Success in any field requires you to be firm and persistent in order to constantly overcome any obstacles in your path. Therefore, you must have a solid character to cope with all the difficulties, setbacks and disappointments of trading.
Become a master of your trading strategy
Do you want to become a master of your trading strategy? If so, then you will need an incredible focus on every detail. You can’t afford to change the trading system every week, as beginners like to do.
The big problem for all newcomers is that they bring in advance failed ideas taken from any trading system. If you really want to achieve something in trading, then you need to focus all your attention on one strategy. It does not matter on what it will be based, on trading on the price of action or it will be a ready indicator system.
Train your brain
When you focus your attention on one method of trading, you will begin to develop your brain and practice such qualities as: patience, discipline and objectivity. The process of creating a master of the trading system can take months, and sometimes years, but as a result, your chances of getting huge profits will immediately increase.
Many traders want to skip this process and wander the internet in search of the “grail” that does not exist. If he were, then the whole economy would be at the feet of one person who would know this secret technique.
But let’s go down to earth, Forex is not a place where money can be earned by laziness and greed. If you are indifferent to your strategy, the market will punish you for it.
Learning to think in the style of a master
A master is a person who knows every little thing, every indicator, every price behavior inherent in his trading system. This is the difference between a professional and a beginner: everything should be perfectly worked out, and for any situation in the head there should be an answer.
Focus on your chosen trading strategy and learn everything you can about it.
Specialization as the key to profitable trading
What do the richest people on the planet have in common? Most likely, your answer will be: “They make a lot of money!”
Yes, it is, but there is something else that helps them make money, while other people fight with their laziness to get out of bed early in the morning.
The key word is specialization.
People who earn huge profits specialize in only one subject. They don’t care about anything other than their business, they have a passion for their occupation that makes them go forward.
We also need to do so. Determine how you are going to trade, if it is the price of action, then choose one trading strategy, which will be studied from and to! And only after that, you can start learning other tactics.
You can’t do something halfway, you have to finish everything.
Follow your trading system
Yes, I always knew there was a path of least resistance everywhere. So to speak, I was looking for ways to properly trade, but I did not fully understand what it is and what it is eaten with.
He always wondered, “Why do some become successful traders and others don’t?”
The answer came to my head by itself, or just the experience directed me on the right track, and only after the notion that a successful trader is a person who loves what he does and does everything systematically, I began to trade profitably.
Sometimes analyzing my trading journal, I couldn’t believe that these deals were made by me. They were far from trading properly. Although before the analysis of the deals, I was sure that I was doing everything on the system, but it was not there.
Disorderly entrances, no fixed stop-loss and take-profits, the entrance to the transaction carried out a different lot, sometimes, it was difficult to understand the reason for the transaction.
That’s when I happen to be a bad trader. But after working on myself, writing on a sheet of rules of the trading system and hanging it in front of my nose, I began to trade in plus.
Every time I was going to open a non-compliant order, I reminded myself that I would have to return the loss of that entry with a lucrative transaction of my strategy.
And why lose if you can earn money?
Later, I realized that I began to think constructively.
Any novice trader is a profitable trader if you follow the rules of his strategy. And almost every trading system is profitable, just not everyone can follow its instructions.
So we get this conclusion that the right trading is to follow the rules and analyze errors.
You already know that discipline is paramount for a successful trader. You may not be disciplined in your trade, but to remain undisciplined in your daily life, it just doesn’t work.
Thus, you yourself must be disciplined, and this will directly affect your trading. You have to follow the principles of your trading, constantly improve yourself, study markets, make trades and control your emotions.
If you do not have discipline, you will constantly do what will damage your trading account. This includes: inability to reduce losses, jumping from one trading strategy to another, too big risks in one transaction.
It all starts with you. Here are some of the things I do to make sure I adhere to discipline in my own and in everyday life:
- I try to be punctual for any meeting, whether it’s my family, friends or colleagues.
- I have a set of exercises and do it every day.
- I always clean my apartment and try to keep clean.
- I wash dishes after every meal.
Start doing things you’re not used to. Over time, your habits change and you will fall in love with your daily routine because it will lead you to stable results. Just in trading you gradually become better, adhering to discipline, and over time your trading capital will begin to steadily increase.
Successful trading is the sum of small efforts that are repeated from day to day.