A wise man once said, “Luck is what happens when preparation meets opportunity.” However, many unsuccessful people seem to believe that luck is just something that happens by chance. To the unsuccessful person who is just hoping to “get lucky” and hit the big time, it may seem like a successful person is “just lucky,” but that’s not the whole story, not even close…
Behind the “scenes’ of a wealthy or successful person are thousands of hours of hard work and repetition. While the poor man has been playing video games or watching Netflix, the rich man has been working hard and doing the ‘boring things’ that most people don’t want to do or apologize for not doing.
Today’s lesson is about how to put yourself in a position to make money trading, how to set yourself up for success in trading instead of leaving it to chance. It won’t just happen because you want it to, I can tell you that for sure. YOU has to make it happen through good preparation and effective routines. You have to love the process and the routine. Once you do, you’ll be well on your way to trading success.
Once you have done your homework and done the ‘hard work’ and your mind is set on trading success, all you have to do is put the bullet in the chamber and fire away when the right opportunity to trade presents itself.
Your goal as a trader (or in any other field) should be to work so hard and master your craft so well that when the perfect opportunity arises, you barely have to think, you just execute the plan. You can nail this down to the expectation of the trade. Win or lose, you know what to expect before you pull the trigger. This way you can prevent fear and other negative emotions from driving your behavior in the market.
Be crystal clear about what your trading advantage is!
It’s a truism to say, “If you don’t know what you’re looking for, you’ll never succeed…”, but SO many traders start live trading without a concrete trading strategy or trading edge. They literally don’t know what their trading advantage is.
Of course, you need to choose a strategy, a trading advantage – something that gives you a high probability of entry – and learn to trade with it before you can really do anything else. Many people don’t even manage to get this beginning right. They move from one method to another without really mastering one, and end up with a hodgepodge of ideas that they call a method. Usually this means that their charts are littered with multi-colored indicators, which in reality means that they’re just confusing themselves.
Getting started is easy, perhaps the easiest part of trading, so don’t over complicate the trading process. I teach a number of high probability price action patterns that you can use to enter the market. Now high probability entry doesn’t mean that you’re guaranteed to win every time. It just means that if you make a large enough series of trades with this advantage, you’ll have a win rate of more than 50%, which is really all you need if you manage your money properly and don’t overtrade.
I’ve written several lessons on how to master your trading strategy, so check them out if you haven’t already. Remember, “keep it simple stupid”, and don’t think too much about this very basic aspect of trading. All you’re doing is finding a repeating pattern in the market and using it to enter. The most important thing is to find your favorite price action pattern and commit to mastering it and trading not when it’s there NOT! This is the first step to putting yourself in a position where you can make money trading.
Develop a trading plan and routine
Boring, is not it? I know that’s probably what you thought when you read the words “trade plan and routine” above. But if you read this little section, you’ll be light years ahead of most traders
Guess what? With boring things you make money, you become rich! A big problem with our society today, where we are constantly confronted with iPhones, is that everyone has to have a screen filled with blue light in front of them all the time, because otherwise they think it’s boring. Do you think Warren Buffet or Bill Gates or even Donald Trump got to be where they are by constantly playing video games or watching TV all day? No. They have learned to love the process. They found what they love, and they got into it persisted. They did not whine about the boringness of routine and process, they made themselves love it because they knew that if they did it, the money would come. When you do that, a funny thing happens: over time, you start to enjoy actually the process, and it no longer becomes something you have to force yourself to do, you just start waiting, doing it.
This is about turning your trading strategy / advantage from the first sub-point above into a ‘bite-sized’ trading plan and routine that you can really dive into and start implementing. You can and should write this down and read it every time you want to look at price charts.
Your goal is to follow an objective plan that will allow you to approach trading from a calculated business perspective and not from a random, ‘shot from the hip’ gambler mentality that most traders end up with.
Once you have your plan and routine written down, start practicing it on a daily basis by doing demo trading in real-time market conditions or even trading with VERY small amounts of money. Ideally, run demo trading for a few months and then start risking VERY small amounts of money until you are consistently successful with what you are doing.
Master yourself to master the markets
The ‘glue’ that will enable you to do step 2 is mastering yourself, mastering your own mind and thus your behavior in the markets.
To trade successfully, you must acquire the right mindset for trading and, perhaps even more difficult, maintain that mindset. Most people manage to get into the right mindset and stay disciplined and focused for a few trades, but often it is the results of those trades that throw people off balance. They get emotional, overconfident or anxious depending on the outcome of the last trade. Do not let this happen to you. Stick to the plan, to the strategy you have mastered. If you notice yourself getting nervous, just re-read your trading plan and take some time off from the markets to regroup, then come back refreshed and focused.
There are a few very important aspects of money and money management that I want to touch on briefly. The most important part of managing your money as a trader is controlling your risk per trade (1R = amount at risk per trade) to a $1R amount that you can realistically lose on a given trade without it affecting your personal finances or your trading attitude.
There are basically two parts to setting yourself up for trading success: the ‘work’ of learning how to trade the market, and then implementing your trading plan. You should break both parts into smaller and smaller pieces that you can more easily ‘digest’ and understand.