The facts are bleak: about 90% of traders will lose their money in the markets. One of the first step to becoming a profitable trader is to appreciate the difficulty of the “trade”. I say “trade” because it is a profession. The markets are not a one way trip to easy riches. A lot of people think otherwise. They are the ones who will lose their money and most likely never recover.
Don’t fret, there is an alternative.
There is a way to not only make money through trading, but also to enjoy trading itself. Not many people talk about finding the joy in trading. But I ask you: why make a living from something you hate doing? Why can’t you have your cake and eat it too?
So, how can I find my trading edge and enjoy the process?
Through LEARNING! Repeat this 3 times to yourself. Your trading edge is found through learning from your previous trades. This can be from either real trading or from online paper trading. It does not matter. The important part is that you take your trading seriously and also keep your own records. On that note...
Let the learning begin!
1. Take Multiple Timeframe snapshots of your trades. When I enter into a stock trade for example, I take multiple snapshots of the stock, its industry and the S&P500 index. I usually capture an intraday, 2 month, 6 month and one year chart for all three. Taking so many snapshots enables me to have a complete picture of what I am doing. Feel free to take snapshots of anything else that you believe may affect your trade.
2. Log the reasons why you entered into certain trades: include any Technical Analysis or Fundamental Analysis you took into consideration. Don’t hesitate to confess any emotions you had while trading. Be honest! How can you get rid of fear and greed without first becoming aware of them? You might start to notice that certain emotions are associated with certain trading mistakes.
3. Create an Equity Performance Chart to visually see how you are performing as a trader. Just input your end-of-day account balance into Excel or any other charting software. Having an equity chart lets you look at your trading a little more objectively. I often look at my equity chart as if it is a stock and I ask myself: does this look like a stock I want to be in? Does it look like it has topped out and is now time to sell? I know something is wrong when I answer yes to this question!
4. Review your Trade Records. This is where the magic happens! Without this step all your trading efforts will be in vein. When you look over your records you must ask yourself: why did I lose here? Why was this trade profitable? What do the winning/losing trades have in common? When you ask these questions you start to learn what works and what doesn’t with you trading strategy. You will also learn how you can better limit risk while giving yourself the opportunity to make big profits. It will be easy to see your previous losses as “educational investments”. And they are!
5. Find your Trading Edge. Having learned from your past, you are now ready to adjust your trading strategy in order to experiment with different tactics. This is where your past efforts will turn into enjoyment. Why? Because the unique lessons that you’ve learned will now bring you confidence. You will know deep down that your trading will gradually improve. There will be no doubt that future mistakes will help you learn and grow as a trader.
I have shown you above examples of how I do my market records. You might find that you have a different way of doing it that works better for you. That’s fine.
The important point is that you keep some kind of records and that you eventually review them.
Doing this is a powerful step in becoming a profitable trader. It means that you appreciate the difficulty of the profession and you are willing to go the extra mile find your trading edge. Fail to do this, and your fate as a trader is sealed.
Remember, the odds of succeeding are against you so don’t take shortcuts!
Actionable Summary:
1. Understand that to if you want to enjoy and profit from trading you must give yourself the opportunity to learn.
2. Start making trading records TODAY!
3. Set time aside to review your trade records.
4. Learn your lessons and refine your trading edge!
Vlad has been trading the financial markets since the young age of 16. His uncanny understanding of technical analysis coupled with his Psychology degree makes him a very insightful trader.
His website PeacefulTrading.com is dedicated to helping other traders develop their
trading edge in the markets.
