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What makes a successful trader?

Admin

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Hi all,

The longer I trade, the more I concentrate on my own development as a trader rather than the actual trading method. I use 2-3 different methods to achieve my monetary goals and I've learnt that the actual strategy shouldn't be the biggest area of focus.

From the books I've read to the thousands of internet posts, the traders psychology and approach is a paramount to success.

Over a few posts I'd like to share the lessons I've learned along my journey from the very beginning to joining a prop firm and then switching back to full time trading. By no means do I have all the answers but I'm sure I can guide some beginners and moderate traders to doing some things in a better way.
 

Spinning D

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I believe that a potential trader must concentrate on just a few pairs say 3 max -the proverb "jack of all trades master of none" really applies to Fx trading is the first step in becoming a good trader.

Step 2 must be having a good understanding of the strategy to be employed -sounds obvious but in the excitement of a live trade fundementals are often the first things that are ditched.

Step 3 must be a planned exit from a trade and a sensible Stop Loss if the trade goes wrong.

Step 4 Review of the recent behaviour of the chosen pairs Also past trades and other peoples trades on sites like this are very useful

Step 5 Finally taking the long view -you cannot become a successful trader overnight -it will take time -Be prepared to study and work at it
 

Wull

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That's some some advice SpinningD. Would be interested to hear John's thoughts.
 

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  • #4
I haven't forgotten about this, I'll add my first thoughts over the weekend when it's a less chaotic at home.
 

Admin

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  • #5
The first part I want to touch on is often cited in many books, forums, posts, articles etc but nevertheless is a good place to start.

The Trading Plan

For me, my trading plan consists of exactly when I begin the trading day, what to review and where. It also covers targets, worst case scenario exits and a rough guide as to how I'd like the day to go. When I first started trading I suffered terribly with discipline and emotions and what trading at Propex taught me was how to control those actions and channel them. I enjoy having a defined routine, it helps me immensely. What also helps is taking a screen shot of every trade I take which allows me to review the setup and the result and also help get some understanding as to why I took the trade and find out if there is anything I could have done differently.

This is very much a personal preference but the key to a good trading plan is knowing roughly how many trades you're expecting to make during a session, expected targets and where you will exit if the day is going south. I cannot underestimate the importance of capital preservation. I have long held the belief it is better to wish you were in a trade than wish you were out of one.

I'd recommend having a defined structure for each session. I will ask myself are there any news stories to read before trading? What has the market/s done during the earlier session? What news is due out during my trading session? What levels are looking likely to be in play? What is for dinner? (kidding...but seriously :laughing: )

The next area I'll focus on is understanding expectations and performance.
 

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Expectations and Performance

You could ask 100 traders what they deemed as decent performance and you'd more than likely get 100 different answers. Performance is extremely subjective and a very important equation in becoming a consistent, profitable trader. My journey began back in 2008 when I discovered Forex and ever since then I have been in love with it and could not think of doing anything else. I live it, breathe it and to my wife's horror, dream it. I was young, impressionable and extremely naive to the ways of the markets. After some light reading I genuinely thought it was not only possible but achievable to return 100% gain a month. Reading that now is laughable but I have read thousands of posts about beginner traders literally shooting for the moon in terms of performance.

One of the first things to realise is that performance is intrinsically linked to risk and should not be overlooked when analysing performance. If two traders both return 10% for the month but one has a drawdown figure of 5% and the other has 25%, I would immediately say one of them is risking too much for their returned performance. There is no magic rule as to what you should risk per trade, it depends entirely on your preferences and ultimately appetite for risk. These days I rarely risk more than 1% and the absolute maximum risk I'll take is 1.5%. I have spoken to traders who risk .25% per trade and others who go big at 5% per trade. Risk is also directly linked to leverage (I'll save that can of worms for another time).

The simplest way I can break performance down is to ask yourself what do you want from the market? My answer is I want to make a consistent gain without suffering major drawdown due to being emotionally intolerant to rollercoaster swings in my equity. I would take 5% a month with drawdown of say 7% than be offered 8% gain with 15% drawdown. It is simply my nature and it will differ for every one.

One of the common throwbacks I see is how can I expect to make 5-10% a month when professional money managers struggle to beat a simple index tracker? My answer is two fold; I am not limited to what I can trade and I do not have to take into consideration trading multi millions of dollars ($50+ million). I have researched and studied my methods to the point of obsession and I truly believe in what I trade which allows me more freedom to trust myself. Another factor I consider is I know full well there are stronger/better traders than myself achieving bigger gains and whilst that used to phase me, I am entirely comfortable with what I am doing.

The final point I want to touch on is understanding what impact expectations has on your trading. Too many traders focus on the monetary gain rather than the % gain from their trading. If you make 5% a month on say a $1,000 that is a monetary gain of $50. A large number of traders will turn their nose up and such a small gain, however, remember that $50 is 5% and it is simply a matter of time and scaling. If you make 5% on a $50,000 account you've suddenly made $2,500 gain. Scale again and a $150,000 account with 5% gain will net $7,500. All that has changed is the size of the account. Growth takes time and patience and you will be rewarded with a huge amount of satisfaction and pride.
 

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I was writing down some key thoughts tonight so thought I would share them. They're very simple but also I believe they are very powerful things to remember when trading. In no particular order:


  • Believe in the dream. I have dreamt of success in Forex from day one and it is probably the single biggest driving factor that keeps me motivated and strong.
  • One trade, one day at a time. When trading for anywhere between 6-10 hours a day it can be very easy to lose focus on the bigger picture. Each trade is another piece in the puzzle and each day is another step towards the ultimate goal.
  • Keep it simple. Trading doesn't need to be complicated and simplicity is the key for me. There is no need to overthink things, learn to trust your initial judgement and make sure to follow the plan in terms of where I want to add or exit a trade.
  • Wait for the right price. Over the thousands of trades I have done, it is remarkable how often I will enter too soon only for price to reach my ideal entry. The fear of missing out needs to be shut out and the ultimate reminder is you cannot lose money by waiting for an opportunity but you can certainly lose money by entering too quickly. Price may go in the intended direction before you manage to get in but equally, there are always and I mean always more opportunities within the trading day.
 

James

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I suppose the success comes to the one who dedicates himself to something he is really passion on. No matter what time or efforts it will cost, if you really love what you do, you will get it and you will succeed. I do believe in luck, but it comes to those who works hard.
 

Spinning D

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I suppose the success comes to the one who dedicates himself to something he is really passion on. No matter what time or efforts it will cost, if you really love what you do, you will get it and you will succeed. I do believe in luck, but it comes to those who works hard.
The old saying James :-

The more I practiced the luckier I got.
 
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