Last updated on April 20th, 2020
As traders, many of us spend a lot of time looking for that winning strategy that will catapult us into the small group of successful traders.
Each of us want to win and we will spend hundreds of hours testing trading systems but always on the lookout for that one key that will open the success door.
Why is it that so many of us fail?
What is the difference between the traders that succeed and those that don’t? There is no one answer, but a number of elements that work against us as traders.
Some of them are:
- Emotions: Failure to learn to control emotion when faced with losses, gains, luck and indecision, which leads to poor decision making.
- Timing: Market timing is a factor you must master to become a successful trader. This is where the majority of traders fall by the wayside.
- Capital: Under capitalization or external pressure to make money. In this do or die situation traders will often feel that the market must produce ‘regular’ and ‘consistent’ profits for them or they’ll be put into a financial bind. This introduces trade psychology issues and sets a trader up for failure.
- Seeking the Golden System: Failure to stick to one system. Most traders typically take a few losses and then they start trying to change things, tweak things, and then ultimately find something else. They jump from one system to the next without ever really learning the system’s rules and methodology. They think they can find a no-fail trading system right away, before they give the system a real trial. The problem with this is there are no “no-fail” trade systems and unless you truly learn the system you’ll never find success.
I am assuming that you are trading system that has a true edge in the market. If you are trading one that doesn’t, the list above really doesn’t matter because you are just going to bleed your trading account dry.
We’ve All Looked For The Winning Strategy Only To Be Disappointed
Now, how many of these have wreaked havoc in your trading?
Personally, I’m probably guilty of making all of these mistakes at one point or another. So, let’s focus on how to avoid these and come up with a plan and a winning strategy to help you develop into a successful Futures Day Trader.
I’m focusing on Futures as this is where I spend most of my time trading. You may have heard some of this before (there is nothing new under the trading sun), but this time it will sink in.
Go ahead, tell yourself; This time I will apply what I hear and learn.
- First and foremost, pick a market that you like or are familiar with. Keep in mind it should be one that suits your trade style. You need to make sure you have enough capital to trade that market as well. For example, if you have a $5,000 account you don’t want to start trading the ES or Oil since they are beyond 2% risk per trade on that size of an account. The NQ or Dow has smaller risk per point, so you and your account can handle a few losses without putting you on that emotional roller coaster.
- Now that you have picked a market, you create a trading plan that will guide you through each setup and trade.
- You will need to test this trade plan yourself, but some of the work can be eliminated if you choose to go with something you know works for others. It’s best to back test the plan for at least 6 months. This will give you anticipated results, so you know what to expect when you start to trade. It is important to know, how many wins and losses in a row your market usually gives you, so that you can be prepared mentally and emotionally to trade it.
- Next, learn how to manage your trades on the platform you will be trading live. This way you can make certain tweaks, such as perfecting your trailing stop. Remember, trade your plan, and don’t deviate from it. If you can execute 25 trades in a row with no errors then you are ready to trade live. Notice I said 25 trades with no errors, I didn’t say 25 trades without losses. You will have losses. This will build your confidence, strengthen your emotions and show you that the system you have works. You can see from these 3 steps, I have covered all of the issues above.
- Finally, it is time to trade the plan in the live market. This will give you the feel of the market. You’ll see how fast it moves and how it responds to news.
Now, you will make mistakes, but don’t let them stop you. Learn from each one. Journal after each trade and then look at your results and emotions as you were trading.
Did you skip a trade because you did not feel good about it or that you expected the market to go the other way?
You can skip a trade if it falls into the parameters of a filter in your trade plan, but if it doesn’t you know moving forward that is an issue you’ll need to work on.
Winning Strategy In 5 Simple Steps
In a nutshell, what are the keys to becoming a successful Futures Day Trader or really any Day Trader?
Does it surprise you that while the actual trading strategy matters…..HOW you work it is what really counts! A winning day trading strategy traded poorly will simply lead to losses.
Take these steps to heart and you will be a better trader!
- Have a plan, backtest the market and then practice till you have it down cold.
- Use that plan and backtest data to help get your emotions and psyche under control. If you know what to expect from your testing, the actual trading will be easy and much less emotional.
- Keep your risk low and don’t use too much margin. This will keep you in the game. You’ll be able to take the next trade after a few losses to come back positive or at least close to it.
- Test the system and know the win percentage. Prove to yourself that it works before risking a dime. IS IT A TRUE TRADING EDGE??
- Finally, share your success and lessons with others. Give back to others, success breeds success!