95% of traders fail on their trading attempts.
Yes, it’s shocking but only the remaining 5% make money out of trading.
Say, if 100 of you started trading and none of you had a clue of what they were doing, then definitely all of you would fail.
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How about another 100 who are knowledgeable?
How come after investing all your time in learning, you would still make no money trading? Isn’t this a steal?
Yes, you can invest all your years acquiring the knowledge and then still try trading and fail.
You will be making part of the statistics that fail in trading, not that you don’t know what you are doing, but there is more to it.
In today’s post, reveal how you can win most of your trades when almost everyone else fails.
Are you excited that you are potentially going to join the statistical 5% that makes money trading?
Let us get at it and see the things you must do to ensure that you win amidst a cloud of failing traders.
Here are 10 prerequisites to winning most of your trades when almost everyone fails:
- Find Your Edge in the Market.
- Do not be fast to Conclude.
- Draft a Trading Plan.
- Strictly Adhere to your Trading Plan.
- Keep a Trading Journal.
- Review your Trading Journal.
- Keep off the Noise of Every Opinion Out There.
- Understand that you are Always Learning.
- Cut your Expectations Down to Size.
- Don’t Let Trading be your Do or Die.
Finding Your Edge in the Market.
You might be tempted to think that if you want to be a profitable trader, then you must find that trading strategy that has almost a 100% winning rate.
But the hard truth is that there has never and will never exist such a trading strategy.
If you ask me, even the most experienced traders of all times will only be right up to 55% of the time.
Meaning, no trading strategy has to be 100% effective for you to be a profitable trader.
So what then?
How do those experts make their money if they are only right 55% of the time they place trades?
It is called finding your edge in the markets.
So what is this thing with the edge?
What exactly is the edge in the markets?
It is a simple concept which you will just understand right away.
No complex explanations here.
Finding your edge in the markets means tailoring your trading strategy such that you maximize your wins and cut short your fails.
Yes, you will win at times but you will also lose at other times.
But what you do to your winning trades to ensure you gain maximally and to your losing trades to lose minimally is what matters.
This is the whole concept behind finding your edge in the market.
Let us take this example.
Let us say your trading strategy is only 50% effective.
Now, you always ensure that you adhere to the 1:2 risk to reward ratio.
You have fixed your lots such that you always risk $1 and have the potential of gaining $2 for every trade.
Do you see where I am headed?
You lost 50 out of 100 trades and that equaled only $50.
At the same time, you won 50 out of 100 trades and that equals a whole $100.
Do your math there and you realize that you made a whole $50 for that trading session.
Wasn’t that profitable?
It indeed was, just because your strategy had given you an edge in the market.
Not concluding too fast.
I know you have not forgotten the example we gave while handling ‘finding your edge in the market’.
Now, not concluding too fast here is in the sense of the results you get when trying out a strategy.
So what is the recommended number of trades that you must execute using a given strategy for you to tell whether the strategy will be profitable or not?
Up there, we used 100 trades in our example.
If you ask me, you must execute a minimum of 100 trades with a given strategy before you can declare it profitable or not.
Let us say for example you had executed only 15 trades in the previous session.
You would probably have lost 10 and won 5, which does not give the right impression about the strategy and you would most probably be tempted to ditch it.
In the short run, your strategy may seem not to produce profitable results.
However, in the long run, most strategies tend to move towards the desired results.
That is why a large number of trades is recommended before a strategy is declared fit for profits or fit for the bin.
Get my point?
That said, you need not conclude so fast when you have just placed a couple of trades and the impression is negative.
Keep at it and in the long run, you may just realize what a gem of a strategy that was!
Drafting a Trading Plan.
We have a number of times talked about a trading plan.
If you thought it wasn’t anything serious, then you should begin taking a trading plan seriously.
You must understand that without a plan in trading, gambling, and blowing of accounts is what you would specialize in.
So what exactly is a trading plan then?
A trading plan is a set of rules and conditions which shape your trading for every session. It is the only way consistent results can come.
What are some of the rules and conditions which your trading plan must contain?
A trading plan contains everything including the following:
- Your entry timeframe.
- Your suitable higher timeframe.
- The markets you are trading.
- Your risk to reward ratio.
- How much of your account you are willing to risk per trade.
- The setup to trade.
- Conditions that must be met before entry.
- Entry Triggers.
- The Stop Loss levels for specific trades.
- The Take Profit levels for specific trades.
Strictly Adhering to Your Trading Plan.
One thing is to have the trading plan and it is a different thing altogether, to adhere to the plan without fail.
Yes, you might have a very perfect trading plan, but what does it help you with if you do not make use of it?
Some traders I know make a trading strategy only to shelf it and go gambling on the markets – don’t be like them.
You must execute trades only as stipulated in your trading plan and nothing outside.
The temptation to change the trading plan after a streak of losses may come knocking, but you need to understand that consistency doesn’t come by changing everything almost always.
Stick to your trading plan because I am sure they were rational ideas that you used when drafting it.
Remember what we said under not concluding too fast?
That in the short run, your trading results are usually random but tend to move towards the expected value in the long run.
So no matter what, stick to your trading plan, provided the plan was not over-ambitiously drafted but rationally so.
You will reap the fruits of your consistency.
Keeping a Trading Journal.
All consistently profitable traders that I know keep a trading journal.
But then you would ask me what this trading journal thing is.
A trading journal is a record of all your trades, not just a record, but a detailed one.
A record of trades, a detailed record?
So what exactly are you recording about the trades? For every trade that you take, you may record the following:
- The trading setup you are trading as stipulated in your trading plan.
- The Market you traded must sync with your trading plan.
- The Price level of your Stop Loss.
- The Exit Price level.
- Profit or loss which you got from the trade.
You must also take screenshots of your charts.
When you enter a trade, screenshot the chart that highlights your entry point and stop loss.
After the trade is over, screenshot the chart and mark out your exit level.
I know what you are asking yourself right now.
You must be wondering why you would go all the way recording information about all your trades and even taking screenshots, right?
Let us find out why in the next section.
Reviewing Your Trading Journal.
So you have done well to keep your trading journal.
For what reason then, were you keeping the trading journal?
Just so that you can feel satisfied that you are doing what you must do?
To impress your mentor?
Not at all.
It is in reviewing the trading journal you keep where the rubber meets the rod.
And so you ask yourself how one goes about reviewing their trading journal, right?
I will show you exactly how.
Find your answers here:
- Scrutinize your trading journal and identify your most profitable trading setup.
- Trade more of the most profitable trading set up as shown by the journal.
- Identify the trading setup that led to most of your losses.
- Avoid trading the most lost trading setup.
- Adjust your trading plan according to your findings above.
- Adhere to your new trading plan.
See at what point you can change your trading plan?
It is at the point of reviewing your trading journal.
Reviewing the trading journal helps traders to improve not only their trading plans but the strategies they had incorporated in their trading plans.
See the significance of keeping and actually reviewing your trading journal? I know you do.
Keeping Off the Noise of Every Opinion Out There.
I know you have been to a number of telegram and WhatsApp groups where traders are free to air opinions.
There, you get opinions of every kind including signals to trade setups you know nothing about.
Others will actually share their completed analyses and you are left wondering what really motivated the analyses because you can’t seem to connect the dots.
You realize that if you follow the opinion of every Tom, Dick, and Harry out there, you will only be getting more confused every other moment.
You would rather just shut yourself from the countless opinions of everyone who calls themselves a trader out there and just stick to your trading plan.
Remember I am talking about a trading plan developed carefully and rationally here.
Note that I didn’t discourage you from telegram or WhatsApp groups which are regulated and information is clear.
Some groups actually share complete information and resourceful materials for traders and so you can still learn from them.
The information does not come from various sources but the admin himself, making it trustworthy and reliable.
Otherwise, ignore all the opinions the world is shouting at you out there.
You will only get more confused every other moment and turn into a loser.
Understanding that you are Always Learning.
I know you have done a lot.
You have read almost everything that there is to read on trading.
But one fact that you will have to learn to live with is that you will always remain a student of the market.
The market knows nobody and may not actually respect your having read.
Sometimes you will be humbled by those candlesticks as they prove to you that you will forever remain a student there.
But never forget that the market is always giving you an opportunity to improve what you know, only if you pay attention and are willing to learn.
Yes, you might have a trading system that makes you money and are satisfied.
But what if the market is giving you hints of another strategy you can employ, either as an improvement of yours or totally a new one, which is more profitable?
Will you with your rigidity ignore and stick to the old ways?
Keep your antenna up and stay awake as you trade.
Allow the market to mend you properly into a better trader than you have been.
This is a dynamic field that no one has ever mastered completely and so you can tell why we are saying that you should stay humble and teachable.
Cutting them Expectations Down to Size.
What expectations do you have from the asset market?
To double your trading account in a day? To raise a trading account from $10 to $500 in a single day? Are all those expectations realistic? I guess not.
Expect anything from the asset market. It is what the market gives that we accept and move on.
Some days you will make losses which you must learn to accept. On some other days still, you will make profits and you will rejoice.
What beats logic is to expect profits always disregarding these bad days and events which must come.
It also beats logic to expect quick money out of trading.
It has been said time and again that trading is not one of them get rich quick schemes and if you take it to be so, then you can be sure that your destruction is near.
This is it.
Just do what you have to do as long as you are not being over-ambitious.
Rationally adhere to your trading plan and own the losses as well as the profits.
If you over-extrapolate your expectations from the markets, it is only you that will hurt at the end of the day.
Keep those expectations low and tread with caution on the streets of trading.
You will learn a lot and you will become better.
Not Letting Trading to be your Do or Die.
Are there traders who are solely living on trading?
Yes, there are.
Is it a good idea to quit your job and embark on full-time trading?
I doubt it is.
That is the reason I would say that you should not let trading be your do or die.
Diversify your income sources dear, because tears are a common event in this field.
Did you know that you can still trade and keep your 9-5 job?
If you didn’t, then know today.
You can read the article ‘How to Trade Forex, Make Money and Still Keep your Full-time Job’.
Another thing you should never dare do is to invest your life savings in trading.
You should only invest a fraction of your life savings in trading.
We always recommend that you should invest only the much you can afford to lose.
That is to mean that even if you lost that amount, you would still place food on your table and continue living normally as if nothing happened.
But if you find yourself investing an amount that if you lost, you would go straight to being a homeless beggar, then you need to stop.
You should come back to your senses and reason with reality.
Cases are rampant also, of guys who take loans to invest in trading.
Some of them do find success but given that 95% of traders will fail, then you can tell that chances of acing it are way less than chances of failure.
Don’t dare go borrowing money to invest in trading because when things come crumbling down on you, then you will face the music.
Tell me how you will survive debt after a shocking and thorough beating by the markets taking all you had – must be difficult, right?
How do you win most of your trades when almost everyone fails?
Above are 10 things you must engage in so that you find success in trading.
Incorporate the ones you have not been having in your trading and see the difference you get in your results.