The odds of becoming a successful trader are very slim. As the great (and late) Mark Douglas once wrote “if I were to classify traders based on the kind of results they achieve, I would put them into three broad categories, the smallest group, probably fewer than 10 percent of the active traders are the consistent winners...The next group which consists of between 30 and 40 percent of active traders, are consistent losers... The largest group, the remaining 40 to 50 percent of the active traders, are the boom and busters. They have learned how to make money, but they haven’t learned there’s a whole body of trading skills that have to be mastered in order to keep the money they make.” The term “trading skill” is often thought of as just referring to the price chart, however, in working with many aspiring traders over the years, I’ve noticed that the greatest “lack of skill” isn’t always on the chart, rather in the approach.
Most successful businesses start by creating a business plan which is a formal statement defining what the business is from a philosophical standpoint. This plan also outlines the businesses goals, objectives and tactics which essentially answer the two main questions that every business has. “What do we want to achieve and how are we going to go about achieving it?” In trading, the “what” is usually pretty simple. We want to produce profit. The “how” however, is a question that often goes unanswered and in many cases unasked.
So what is written inside a successful trader's business plan(trading plan)? To be a successful trader all you need is the following: 1) A strategy which provides you with an edge in the markets and 2) the ability to consistently execute that strategy.
Trading is all about making decisions. That seems simple and straightforward enough. How will you approach the market? What timeframe will you focus on? What will inform your trading decisions? In short, deciding what trading style you will pursue will probably be the single biggest determinant of your trading success or failure.
One way of doing will be monitoring your weekly P&L and analyzing the results on a monthly basis, which is something I would urge all traders to do. It’s the only way to objectively evaluate your trading results, as memories can be tricky.
There’s no universal style that fits all traders all the time and we all have to go through a process, frequently trial and error, to see what works best for each of us.
Some prefer to use hourly chart to FIB trade --
Some prefer to use lower timeframe to surf (Rwaves) --
Same chart, Fib trader will be shorting on level and exit on levels.
Trade management, or risk management more accurately, is usually determined by the economics of your trading account, which I would suggest is the starting point for everyone. Above all, vow to stick to your risk management plan as an integral part of your trading style.
I can’t tell you what approach is best for you, but I can tell you that not having settled on a trading style is no approach at all.
Trading Like a Business
The odds of becoming a successful trader are very slim, but greatly increased if you take it as a professional approach. Yes, being a professional trader can provide us with freedom of time, but we shouldn’t abuse that privilege. A good business looks to streamline their process in order to increase productivity and as traders we need to do the same. We are our business, and if we want to see consistent results we need to trade a consistent strategy, while taking a consistent approach to the markets. If done correctly, our business has a chance to survive, if not then we’re most likely destined for failure.