Big Mike's Trading Blog

Day trading futures, discussing money management and trade management techniques, and more

The key to successful trading

First, let's establish a few of my beliefs, then we'll discuss how to use those in order to become a better trader or perhaps corrective mistakes you're currently making.

  • Most successful traders blow out their account at least once.  Many blow it out a second time, too, before they finally start making money consistently.  The rule is:  if you are still standing after 12-18 months, you've already beaten the odds and joined a pretty elite group.  They say that 95% of traders lose money, and the other 5% take all their money.
  • Most successful traders have their own method and do not follow others (rooms, groups, etc).  Why?  Even though there is much (much!) to learn from rooms and groups, even forums and blogs, you will not start to consistently make money until you have complete confidence in what you (not the group moderator) is doing.  You have to trust it, and generally that means you need to invent it so you fully understand it.  I don't mean you invent your own indicator, rather I mean you invent your own style.
  • Many high-powered executives think they can dominate in trading like they've dominated in their professional careers.  They bring lots of money to the table, and apply the same mentality and analytical thinking from their day job to the trading world.  They fail, at least initially.  (trust me here)
  • A lot of people who are "average joe's" are excellent traders.  In their former professional day jobs they were middle of the road performers, but in trading, they excel.  How is this possible?  They tend to be able to move past the analytical approach and don't get caught up in the same thinking that made the C-levels good at their day job, but bad at trading.

Five important but often ignored steps:

  1. Start with a well funded account, you'll need at least twice as much as you plan.
  2. Plan to spend all that money (I'll say "spend" rather than "lose").  Think of it as paying your tuition, and getting your masters degree in day trading.
  3. For the love of Mike, don't go to cash until you are consistently making money in sim mode.  I'm not joking!
  4. Don't try to make money.  Focus on not losing money instead, and the winners will come.  Besides, the best strategy is to live to fight another day.  And believe me, trading is like war.
  5. Slow your roll.  No need to trade 10 times a day, every day, while you are learning.  Try to pace it so you can last at least a year before blowing out your account.  You want to be able to look back and say "if I only knew then what I know now", and still have some money left to do something about it.
I've done all that, now what?

Once you fully understand what I've said above, then you should be ready to start making money.  This means you've been at this for at least a year, have spent at least a couple thousand hours in front of NinjaTrader and read a dozen books, thousands of fourm posts, and sim traded over a thousand profitable trades.

If you've done this and aren't making money, it's likely you are the problem.  Yes, you, as in -- well, you.  All hope is not lost, but you need to change your way of thinking because clearly it isn't working.  If you are one of those traders with 20 indicators on your chart, you probably need to re-think that.  Simplify.  Start with the most basic layout, strategy, and goal possible.  Then slowly -- very slowly, add to it.  If you think a 55 tick chart and scalping 2 ticks is the way to success, then change it up to a 5 minute chart and make your target at least 2 points.

The important thing is to not get caught up in something if it isn't working.  You cannot bend the market to your will.  Instead, you have to adapt to the market, and believe me, it is constantly changing.  What worked five minutes ago may not work again.  Instead of viewing that as a problem, view it as an opportunity to win -- because you know the market changes, and so many other people have yet to learn that.

Take their money!



Anonymous said...

All very true and excellent advice; too bad statistics show most will not be taking the advice. :) - GK

Skyler said...

A really concise and inspiring post. Just what I needed - thanks.

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