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.
[URL deleted]
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.
[URL deleted]
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