5 steps to becoming a profitable trader

Joe_FFI

Trader
Apr 29, 2020
1
0
6
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London
5 steps to becoming a profitable trader


Right first things first, we all want to be profitable traders, how come some make it but most don’t? The five steps mentioned in this blog will certainly progress your trading. The majority of retail traders don’t follow any of these five steps and it plays a significant factor in them failing to achieve consistent profitability.

Step 1: Design and back test your strategy.

The first thing you need is a strategy. Without this you wont know when to buy or sell. A strategy is deeply personal, you may find one on the internet but if it doesn’t suit your personality it is highly unlikely you will follow it. The best way to find your first strategy is simply look at the charts, look to see if you can find repeating patterns. They are there. When you find them write some rules around the execution and back test this strategy. After a decent sample size (100 occurrences) you will have reliable data so when you analyse your expectancy you can have confidence in it.

Step 2: Build your trading plan.

Now you have your strategy, you need to have a plan for your execution. You should know everything about your trading plan when you execute. Execution is not a time for thought, that should all be done. Examples of what you need to know, shall I enter a limit order or wait to get triggered? shall I execute at market? do I wait for a candle close? where is my stop going to be? where is my target? is the risk reward acceptable? how much am I going to risk? what do I do if there’s high impact news due? what do I do if a trade is in profit close to high impact news? what do I do if a trade is in a loss close to high impact news? do I hold overnight? do I hold over the weekend? How do I manage dynamic risk as the trade evolves? This is a lot to think about but you should never ask yourself these questions when you have a position on. Iron these out first and incorporate into your trading plan first!

Step 3: Do your analysis first so you are free to just execute.

This is a simple one, get your analysis done so you are simply waiting for price to reach your levels of execution, wait for price to confirm your thesis then effortlessly execute. This is very similar to step 2 but stops you entering sub standard trades and helps build the skill of patience.

Step 4: Log and journal your trades.

You will never be able to track your edge properly if you are not logging/journaling your trades. This is of extreme importance. Every professional trader knows there trading statistics due to trade logs and journals, most retail traders don’t do this. Retail loose, professional traders don’t! Do what the pro’s do. Review your journal every 50 trades looking for ways to increase your edge.

Step 5: Remove your PnL from your screen.

This is the killer for so many new traders, they spend their day staring at their PnL. This almost always leads to letting losses run too far but cutting winners too early. This results in you executing your profitable edge and ending up with a negative edge due to poor trade management. Don’t do it…. Seriously don’t!

If you follow these five steps you will be ahead of 90% of the retail trader community and well on your way to achieving consistent profitability.

Thanks and remember, always trade for tomorrow.

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Dora_WalletInvestor

Active Trader
Aug 17, 2020
300
46
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Great list indeed! Many posts and articles I see with similar titles usually offer very generic information, but this one is very informative. Bookmarked for future me.
 

Oswald

Trader
Apr 12, 2019
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I agree especially with number 5. Looking constantly at your PnL puts extreme pressure on trading. I was doing this in the beginning and on a few occasions I prematurely closed my positions with loss, instead to wait a little bit and close it with profit.
 

Zalea

Newbie
Sep 15, 2020
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I read your whole article. It's amazing, I like your idea. Such a neat idea is not usually seen. You have described it in a wonderful way. We have such a service. Thank you for sharing your article.
 

Oswald

Trader
Apr 12, 2019
72
7
24
36
Excellent article. I agree with backtesting your strategy. Demo account is very good place for this purpose. I was using it three months for testing my current strategy. So far, so good.
 

Jerry_Ken

Trader
Dec 11, 2020
57
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A Trading journal is indeed an effective way to improve your trading as it gives you an insight as to what should be done and what needs to be eliminated or improved.
 

e_abrams

Active Trader
Dec 11, 2020
451
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Excellent article. I agree with backtesting your strategy. Demo account is very good place for this purpose. I was using it three months for testing my current strategy. So far, so good.
Backtesting is important, but I think testing in real time is just as important.
 

Zeenat shein

Banned
Apr 11, 2020
56
13
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Becoming a successful trader is not an easy task. Many people want to be successful trader, but forget that being a successful trader is a long and full of hard work process. There are several steps that a trader must get through before becoming a successful trader. Read this article to find out 5 steps to becoming a successful trader.​