March 23, 2013
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The Magic Key to Successful Trading
I’ve read numerous books on trading from the beginners series to those intermediate and higher on improving one’s trading skills.
Some focus on mastering certain techniques, others on risk management or some other “improvement based” factors to move to higher levels.
I’m here to say there is one critical thing that every would be trader needs in order to move forward.
Just send me $99.95 and I’ll tell you what it is.
Kidding.
The truth is the following – it may sound stupidly simple, but it’s guaranteed to be overlooked by 99% of traders including myself when I was on the beginners curve.
The key is before one can improve their trading skills, they FIRST have to be a satisfactory trader, and what I mean by “satisfactory” is being able to consistently make a profit over time trading regularly.
Taken at first glance, what I said sounds very tautological- some will think improving trading is the same thing as learning to be a satisfactory trader. It isn’t. These are two distinct animals with two different goals/mindsets.
Improving trading generally means a whole host of things – making more and more money, being able to trade for a living, becoming wealthy, living a life only dreamed about, and so on. This compares to being a satisfactory trader, with the ONLY goal of being able to generate consistent profits over time.
What does it mean to generate consistent profits? Over many trades, one can satisfy the following:
1) Net positive days.
2) Net positive weeks.
3) Net positive months.
Having a net loss day is normal, but positive days should be the norm versus the exception. Same thing goes with weeks and especially months. If one has an abundance of negative days/weeks, and winds up with a positive month, that looks like more of a lucky “big” trade saving the day instead of consistent good trading. Relying on good luck is fine for Vegas trips, not so much if the goal is to be consistent or stable.
What I’m saying is the first thing a trader must do is develop a technique/method that allows them to generate consistent profit before thinking/planning anything else.
How much profit? Doesn’t matter, as long as it’s consistent. It can be just a few dollars a week. The key is being able to repeat that again and again over time and numerous trades.
Once you’ve mastered generating a profit consistently, then one can move on to working on the host of improvements like building wealth, trading for a living, etc,…
Knowing this can save one a ton of “tuition” in mastering the learning curve since it sets the focus on just staying positive versus getting “rich”. Everyone wants wealth to come ASAP which is why the key basic element is overlooked. Trying to be a satisfactory trader AND generate wealth just makes the learning curve many times more difficult – that I know from experience!
When I think back to the difficulties I had and boatloads of money lost when I was still learning how to trade to how fast I can now understand and pick up new things when “improving” on my core skills, the better path to success becomes obvious.
Comments (7)
yes sensei
So my question is really about your previous post. You mentioned you didn’t sleep some nights and such. If you want to become a successful trader, can you still have a vibrant social/personal life outside of it?
@Kittyluve -
That’s a good question. Being a professional retail trader, like most other self
employment businesses, will usually require a ton of front end work to
get it going. So at the beginning stages you are putting in far longer
hours than you would in corporate. As the saying goes, you will have to
work harder for yourself than for anyone else. The key thing is that if
you enjoy what you’re doing, it doesn’t feel like work. That’s the
crucial difference. The goal is to get one’s business going well enough
that hours can be toned down over time.
One of the current benefits are you get to choose when you want to work. When I’ve traveled
back east, I could put my trading on hold and not have to worry about
requesting time off. I can also trade while on travel if I choose. It
essentially gives me the ability to live anywhere on the globe as long
as I have an internet connection.
For the last post, I stayed up all night because I was anticipating a big market move I wanted to take
advantage of. If you had an opportunity to earn in one day more than
what you make in a month of corporate salary, you’d be motivated to burn
the midnight oil too right? And that’s one of the best things about
trading – you have an opportunity to earn your require/desired income up
front rather than spacing it out in bi weekly installments. So if you
earned your monthly goal in a few days, you could take the rest of the
month off if you wanted.
In my current stage, I’m trying to make the market my ATM, so I’m also in “lab mode” besides work mode while I
continue to refine my methods. Success means I’ll have lots of time to
execute the social/personal stage since I’ll have both time and moolah, a
winning combo. =) My long term goal is to get to a point where I earn
enough in passive investments that even day trading becomes optional.
Then the question becomes what do I do with all that free time?
Besides
traveling to nice locations, I think I’d enjoy volunteering more.
@SoullFire - Thanks for the detailed reply!Yup I bet it is way more motivating to work for yourself since you can keep your own profit. I get the whole sacrifice now to reap later, but it would suck if the world ended tomorrow or something. I feel like I should be doing something else besides being a regular worker bee trapped in a hive, but I’m inherently just really lazy. I could write a list of excuses, but ah why not just say the truth lol.
@Kittyluve - It’s good to balance some enjoyment today along with future plans – I want to enjoy the present but I also don’t want to be a poor struggling senior. I can be lazy too, but my desire to achieve financial independence is stronger than my desire to laze about playing video games or partying. =)
Your post reminds me of the simple goal… turn a profit. It helps to focus on that rather than the thousand questions I have about unknown territory.
How should I describe those days when I am still holding those stocks that are below their purchase price? no gain/loss, or loss?