New traders often think that in order to trade the markets profitably you have to have a finance degree, a gaming computer with 8 monitors, 140 IQ and a whole boatload of luck. While none of those things will hurt, they are not the key elements of being a successful trader. Let’s talk about what is. Below are 6 things every trader needs.
1. Determination & Grit
This character trait is so crucial for anyone who wants to make it in trading. If you have traded for more than 15 minutes, the market has probably punched you square in the face. The market deals out left hooks like no one’s business and even the best traders in the world cannot duck and weave their way out of every punch. The key is survival, and not getting knocked out. It is absolutely imperative that you stand back up after every loss, every mistake, and every hardship. You have to take each knockdown and drag out moment with the market as a learning experience and make sure you come out the other side smarter, better and grittier than ever.
2. Control Over Fear and Emotions
Trading While Emotional (TWE) can be devastating to a traders P&L. Our fear and emotions cloud our judgment and can give us tunnel vision when viewing charts. Have you ever looked at a trade a week after you took it and wondered what you were even thinking? Yup, chalk that loss up to TWE. Our fear can cause us to hesitate and miss the perfect set up, then our emotions cause us to chase and FOMO into a terrible set up for the perfect P&L crushing storm. If you are struggling with fear and emotional control, try journaling before, during and after a trade so that you can track your emotions and better address them. Developing a ridged trading plan can also help with emotions.
3. A Plan with Edge
One of the most critical things every trader needs is a strategy with edge. What is “edge” you ask? Edge is as simple as a higher probability of one thing happening over another. A trading plan needs to have rules for your entries, stops, targets, daily loss, and much much more. A trading plan will help a trader stick to a proven system and live in a probabilistic mindset. However, the plan will be utterly useless without the 4th item on our list.
The greatest plan and edge in the world will get you nowhere if you are unable to stick to it. The best traders in the world are robotic in their discipline and executing their plans. If you struggle with following your trading plan consider implementing a punishment for breaking your rules. A good beard waxing, 1000 sit ups in a day or eating only onions for 3 days should certainly make you follow your rules…at least for a few months.
5. Risk Mitigation
Most traders have learned risk mitigation the hard way, by blowing out accounts and losing boat loads of money. A lucky few have had mentors, coaches and other traders teach them risk mitigation and systems to control loss before anything catastrophic. If a trader is able to consistently lose small they will be able to stay in the game and eventually become profitable. Always think about what the downside (risk) is on every single position you enter, before you even enter the trade.
Trading, just like anything you want to be good at takes practice. Just like you would not expect to be a pro at golf the first day or week or month or year that you pick up a club, you shouldn’t expect to be a pro trader in a few weeks. It takes time on the golf course and thousands of swings and reps to become a good golfer and the same thing goes for trading. Back trading gives us the ability to practice trading without putting real money on the line. It is the thing that separates the profitable from the unprofitable, so if you are not practicing trading, it’s time to start. It is the game changer you have been looking for.
If you can do everything we just talked about above, have great mentors and coaches, and put in loads of screen time in front of charts you will be well on your way to consistently profile trading. With help on any and all of the of the above items visit Reallifetrading.com. We look forward to enriching your life.