Last updated on April 28th, 2020
We’ve seen many traders come and go through the two plus decades that Netpicks has been in the business of helping traders succeed.
Whether they were great traders from the start or could not grasp this business, throughout that mix we’ve seen many who have experienced some degree of trading success.
In most cases, this success isn’t sustained for very long. Sometimes this is down to changes in the markets and other times it’s because of the trader’s lack of ability to maintain focus and discipline.
What is a traders overall job? To make money. What this really means is taking money from someone else.
Like in any competitive battle, staying one step ahead in the game and taking action that gets you closer to your goals (while others don’t), is crucial to long term success.
2 Main Principles For A Successful Trading Career
Being able to make a career out of trading comes down to two main principles:
- A trader having the ability to trade in the market consistently.
- A trading having the ability to trade in the market effectively.
Our experience with many traders is seeing them striving to become successful by addressing one or the other of these two principles.
But they go together, consistency + effectiveness and without one the other often breaks downs.
For example, if you’re trying to trade consistently but you’re fading a breakout after an FOMC meeting, it’s likely that you’ll become quite frustrated with the number of losses you’re taking.
On the flip side of the coin, if you have a fantastic strategy but cannot exercise appropriate risk controls you’re likely to end up losing the bulk of your trading account – there’s no such thing as a strategy which will work 100% of the time.
One is trading consistently but ineffectively, the other is trading erratically but with an effective strategy.
Neither will make money over the long run. Understanding and acting on this idea is key.
Trading Strategy Comes First
A decent strategy is the first obstacle in the road to achieving success.
This is probably why so many people want to find the secrets to trading and jump on any marketing hype with blinders on.
But any trading strategy is useless unless you have the ability to trade it consistently in the market.
However, without then adapting with the markets it could be this consistent approach that becomes the undoing of a trader. Clutching at some trading method which once transformed your trading results but no longer works with any amount of consistency clearly is not likely to end well.
Consistent and Effective Trading
Trading in a consistent and sustainable manner involves these four points you should consider
- Knowing what your trading plan is
- Monitoring your own ability to execute this plan
- Having strong risk control
- Working with your psyche
Trading effectively from the market’s perspective would consider:
- Monitoring the success of a strategy over time
- Assessing current market behavioral features and conditions
- Understanding the capabilities of other traders and their tools/technology and assessing whether new tools can be useful in your own trading
- Researching new trading ideas
Getting to the stage where you are able to execute in a consistent manner shouldn’t be difficult so long as you’re willing to put in the work and have a strategy with some sort of edge.
What can be much more difficult for a trader to deal with is how markets and their participants will change over time and therefore negatively affect an edge.
- Fundamental shifts in economic conditions alter a market’s behavior.
- Changes in trading technology and improvements to charting techniques can have a great impact on how markets trade.
We must embrace change as opportunity rather than be fearful of losing our trading edge because things change. And so must we.
Adapt Or Perish
Nothing guarantees success in trading, but there are a few things which virtually guarantee failure.
- The best traders are adapting and shifting their habits all the time
- They are constantly assessing their ability to execute properly
- They are constantly assessing current techniques and the potential of new trading ideas
- They are constantly assessing how particular instruments are trading and what the underlying market conditions are
And why do they do this?
Because nothing stays the same forever – so why should you?