In trading, what does “winning” mean to you?
Several persons may translate winning while trading forex, futures, and stocks, to raking in profits. Although this isn’t far from correct, it isn’t an encompassing answer. To answer correctly, you must include everything you did and still doing, which made you win consistently.
All traders and investors in the trading arena claim they want to win. However, only a small percentage of them are willing to make intentional efforts towards winning. And this cuts across seeking what is needed to be a winner, and if they know already, follow through to consistently get their desired results.
Anyways, before moving ahead, let’s define who a winning forex, futures, and stock trader is because many traders are caught in the web of thinking that what it means to win in trade is to make a profit. As much as this isn’t wrong, and, of course, profit is essential, it isn’t what successful trading is all about. Basically, successful trading is more about following some “essentials” (a sequentially ordered series of steps).
So, let’s start from scratch: after opening a brokerage account, either from your retirement account or from your savings, if you want to achieve your desired results (win), there are certain essentials to follow. It all starts with knowledge of the market and skill trading and investing in the trading arena. As a win-oriented forex, futures, and stock trader, you must identify the asset class you plan to trade. Next, you must develop and make use of a trading plan. Your macro (trading) plan must outline your goals, purpose, and intended strategies, including timeframe, financial objectives, and others. It would also be best if you had a guideline for your exits, entries, setups, and so on. Basically, these rules are a product of your macro trading plan. The fourth essential is having a risk and money management strategy for every trade, including appropriate position sizing. Finally, self-discipline is crucial. Without gainsaying, you may not succeed as a trader without self-discipline.
Having discussed these essentials of being a successful trader briefly, let’s delve even deeper:
Knowing how to be a successful forex, futures, or stock trader can be quite difficult, as your internal stories of learning can be annoyingly stressful or beautiful. These internal stories can make you your worst enemy. For example, you decide what you want to do and what you need to learn, after which you think about how difficult it is going to be or how you failed the last time. More often than not, these negative internal stories dislodge and disrupt one’s ability to learn and stay focused. These stories are mostly established in childhood and gradually continue to gain ground, feeding on negative remarks and messages received from family, peers, people of authority, and so on. Also referred to as limiting beliefs, these negative internal stories play and replay in our heads. Statements like “you will never make it,” etc. may leave one with a poor self-image, low self-esteem, and perhaps self-hatred. However, regardless of your case, having self-knowledge and learning how to handle negative triggers effectively will considerably help you better your self-image. And through this way, you gradually begin to rewrite old negative stories. So, you must equip yourself with both the knowledge of the market and yourself.
After having proper knowledge of the market, next, you must build a trading plan. This translates to the identification and formulation of strategies with high potentials of increasing your trade possibilities. For macro levels, it is about organization and planning of one’s trading. For micro levels, it is about the organization and planning of each trade. You should be focused on figuring how to accomplish your goal, and the best actions needed to achieve such a goal(s). You will also want to have a vision of what the outcome will be. Basically, at this point, your intentions will receive life and get converted into a practical step-by-step process. Honestly, dreams are common, and everyone has them. However, their execution is most important. Therefore, it is safe to say that your plan is a logical map explaining your destination and the best routes to getting there.
To be a successful trader, you need to follow some rules. And these rules are the foundation upon which you build your behavior. Before now, most traders source for rules from teachers, books, mentors, and so on. As much as this is fine, you should know that some of these crucial rules come from the heavy knocks of experience and pain. And undoubtedly, the rules in one’s life affects such a person’s trading. Factually, as we grow as humans, we develop some typical responses to reoccurring situations. These behavioral patterns and responses can be easily referred to as the rules that you live by. These cultural myths or rules reflects in all your life and trading decisions too. Most of these cultural myths revolve around power, money, winning, worthiness, and competency. Funnily, you may never be aware of many of these rules. This insinuates that in a case whereby your choice goes unchallenged, the underlying motivation of such behavior or thought remains unknown to you. However, identifying the rule allows you to challenge and change such behaviors or thoughts. Above all, you need to be very cautious about following the rules of the fools. Basically, these are the rules that need to be challenged and changed. They include:
- You will earn a lot of money with a big position size.
- Stops only take me out earlier; it will always come back.
- The more trades I enter, the more my opportunities to make more money.
Hence, you must carefully identify your rules and ensure that you’re not following the rules of the fools but effective rules.
Undoubtedly, risk management and money management plan are crucial. This also includes an appropriate lot sizing. That is, having the best number of contracts, lots, or shares for your trading account. It is utter foolishness to have up to 5 contracts in a trading position representing more than 2% of your portfolio. With something like this, you can be sure of blowing up your account with just some sour trades. In addition, your risk to reward ratio should be appreciably considerable enough. Many successful traders make use of a 1:3 ratio. This means that they are risking a dollar to earn three. Regardless of the trade, this is their minimum. The greater the risk to reward ratio, the better your profits in case you win.
Finally, the most crucial essential of trading is self-discipline! Regardless of the extent of market knowledge you have, how tight your money and risk management strategy is, and how strong your trading rules are, none of the other essentials hold any water without self-discipline. To be a successful trader in the financial markets, you must follow your rules and your plans. The primary rule is to protect yourself. Besides, self-discipline is not as much about will power as it is about harnessing and managing one’s emotions and thoughts. To bring your best game to the platform, you must possess emotional and mental tools in your tool jacket.
Happy trading!