Deciding to begin the trading journey is one of the biggest decisions of your life. It is a sport that is truly meritocratic. It is not a team game where you win and lose together. In the end, your P&L is your P&L – and if you lost money, well, you lost money.
But the rewards for success in this business are unlimited. There is no ceiling on how much you can earn, and the only limits are the ones you impose on yourself.
That does not mean it is easy – definitely not. The market will require demands of you that far outweigh those of your previous employer (should you ever become full-time). If you want an “easy” life, then perhaps trading is not for you.
In this business, the market demands a certain level of respect. The freedom you believe traders have is a myth. You will rise early to begin work at 07:00, no matter where you are on the planet. Failure to pay these respects will see the market reach into your bank account and relieve you of your cash.
There are certain rules that need to be followed, and should you familiarise yourself with them and become accustomed with them, you will vastly increase your chances of success.
One attribute of consistently profitable traders is that they have (surprise!) consistency. They are consistent in their habits. They are consistent in their routines. They are consistent in their beliefs.
Being consistent will translate to consistency in your P&L. Trading is like working out in the gym. If you work out three times but stuff your face over the entire weekend, then you will look like someone who works out three times a week and stuffs their face over the entire weekend. But if you are working out most days, and most of the time you are fuelling yourself properly – then that is what you will look like.
“You may fool the whole world down the pathway of years
And get pats on the back as you pass
But your final reward will be heartache and tears
If you’ve cheated the man in the glass.”
Consistently profitable traders know that if they turn up, do the work that is required, and consistently work to improve their process, then their results will follow.
Know your market
No matter what market you trade, you should understand the levers and pulleys that move prices. If you trade forex, then you had better know the key indicators to watch out for. If you trade stocks, then you should know what moves them and why.
This sport is brutal and it takes its pound of flesh. You are up against algorithms, swarms of analysts crunching things you cannot even comprehend, and battle-hardened veterans who have perfected their craft over years of relentless effort.
Do not step in unless you have done your research.
Get a feel for your numbers
It is said that 90% of traders lose money, and very few reach the level of being able to consistently profit from the markets.
Most traders also place trades, and never ever look back on them to see what went wrong and what went well. It is difficult to improve if you do not know what you should be improving on.
If you find out that your scalp long from extreme downside volatility is only working less than half the time, then you need to know if it is delivering net gains to P&L over the long run given your risk/reward ratio. If not – it is time to can it.
Start doing more of the things that work, and less of the things that do not.
Author Michael Taylor’s website www.shiftingshares.com contains a number of tutorials on how to trade and invest as well as his free book – ‘How to Make Six Figures in Stocks’.