3 Steps To Take In Order To Become A Successful Trader
Use this 3-step plan to stay focused on your own success.
#1. Get Educated!
Learning an effective trading strategy can seem like a huge hurdle, but it doesn’t have to be. As you approach trading, it’s crucial to not skip steps in the learning process. Make sure you understand all of it’s components before you trade live markets. Using software can also help to enhance decision making. Treat trading like a business, not a hobby. Also, make sure you are mentally prepared for trading. Doing practice exercises, marking up your charts, doing bar-by-bar analysis in simulation and market replay will drastically improve your chance of success. If you treat this seriously and want a positive outcome it is important to follow this process while being patient to learn and develop your skill. Those who do the work will be rewarded by their skill and application.
#2. Develop Your Skills (LUCK = Preparation + Opportunity)
This is an important step that people often skip. I’m sure you’ve heard it before, that a successful trader is “lucky” somehow. Trading is not about luck it’s about preparing and knowing when to capitalize on opportunity. Those who practice their skill and trading education reap the rewards. It is important to know what level you are in the trading learning process. We like to break it down between these 4 different stages, to give you a better idea of levels of growth.
Stage 1: Unconscious Incompetence (we don’t know what we don’t know) – “You are unaware of the skill and you lack the proficiency”
Stage 2: Conscious Incompetence (we know we don’t know) – “You are aware of the skill but you are not yet proficient”
Stage 3: Conscious Competence (we know we know) – “You can perform the skill but only with effort”
Stage 4: Unconscious Competence (we don’t know that we know) – “Performance becomes automatic”
Being open and honest about where you are in the process will help you decide what to work on next. Don’t be embarrassed if you’re not at stage 4. Even professional traders had to start somewhere and, by admitting you aren’t the best at something, you are now on your way to changing your future.
#3. SIM to LIVE Trading process
In order to get to the “Unconscious Competence” level, we need to treat trading like a business not a hobby! Start first with simulated trading before going to live trading. We can plan for success by only taking the best setups and practicing patience before action. Evaluate risk when planning your trade setups. What works for you might be different than what works for someone else. The most important part of this equation is Practice, Practice, Practice!
Embrace the process and don’t be afraid to make some mistakes along the way. Start with healthy expectations and work towards improvement, but don’t expect perfection or certainty EVER! Even pros have losing days, although I’m sure many of them would not admit it.
Start a trading journal. When you take a trade, log it in your journal and review it. After you have an extended time of trades in your journal, go back and evaluate your decision making to look for +/- patterns and areas that need improvement.
Get your head in the right space by reading about trader psychology. We recommend “Trading in The Zone” by Mark Douglas, but there are many other resources online and at your local library.
As you’re starting out, you should be trading on simulation for at least 4 to 6 weeks or until you have mastered confidence, consistency, patience, rules, trade selection, profitability, and positive belief. Trading live markets prematurely causes traders to set themselves up for failure.
So, there you go! A comprehensive plan to get you from where you are now onto the path of where you want to be. Only you can put in the work to make yourself a better trader by educating yourself and practicing your technique. Remember: Preparation is key and it’s better to be prepared than lucky.