How would you answer this question? What makes a trader successful? Is there one special quality they need, one bit of knowledge they need to learn, one tool that they could use to make them successful? Or maybe, it’s just luck. They are lucky, and now they are successful!
The truth is, there is no one simple thing that can be given to immediately make a trader successful. Luck may help sometimes, but it’s not a reliable process that we can count on. The only consistent and proven way that makes a trader successful is by the process of hard work. Nothing will be given to you without you putting the time and effort into your trading, and even then it may still take a while. Time and hard work will eventually place you in a position where you can be successful. The question is – are you willing to put in the time and effort needed to become a successful trader?
Successful traders have spent the time to learn how to trade and then used that knowledge to create a trading plan. Most have written their rules down, so they know exactly what to do to enter a trade and to exit a trade. If I asked everyone to send me their written trading plan (please don’t, I don’t have enough time to read them), most traders couldn’t because they either don’t have one or haven’t taken the time to make it real by putting it down on paper. If you don’t have a well-defined and written trading plan, then you are not ready to become a successful trader. This is something that takes time and hard work. Again, I ask – are you willing to put the time and effort to become successful?
The development of a trading plan does not need to be complicated. In fact, it should be as simple as possible. Let me suggest a few things that you should begin to develop your trading plan.
1. Define the “why” for your trading.
I know you want to make money but the “why” is more than just money, it is the reason behind your need for money.
2. Define your risk rules.
You need to identify your “sweet spot” for how much you are willing to risk. If you risk too much you will become fearful and if you don’t risk enough you will feel unsatisfied. This should include how much risk you want to take in each trade, as well as how to calculate your position size.
3. Define your entry and exit rules.
I will put this into two categories. Setups and triggers. The setup is what you see on the chart to know a trade is about to happen while a trigger is what you see on the chart that tells you it’s time to buy or sell.
4. Define your analysis process.
This is what you are going to do to analyze your trades after they are done. Do this on a daily, weekly, and monthly basis to make sure your trading plan is working the way you want.
Ok, so that’s it! (Well, at least some of it) If you want to be successful then create a well-defined and written trading plan. Do not leave your success to luck or chance or anything else. It’s up to you - now go and put the time and effort into your success! Be that successful trader you want to be!