From Rolf at Tradeciety
6 steps to becoming a master trader
1. Don’t use fixed position sizes
Many traders used fixed lot sizes in trading, which means that on every trade, they risk the same amount of contracts. This, however, is ineffective and can turn a potentially profitable trading strategy into a losing one VERY easily.
Instead, you have to measure the stop loss distance for every trade and then recalculate the number of lots, stocks, or contracts you have to buy to achieve a consistent % risk.
This should be a top priority in your trading since it is an easy fix with a potentially large performance boost.
2. You don’t have a trading plan
Know in advance what you will do. Don’t only have a plan for your entry, but also think about what you will do during the trade duration. How do you deal with the news? Do you cut your trade early, and under which conditions? When do you move your stop loss, and where to? Do you add to trade, and if when and by how much? Do you exit your trade by the end of the day or by the end of the week? And so on…
Many traders spend all their time obsessing about entries, but once they are in a trade, they don’t know how to respond. This leads to impulsiveness and inconsistency in your decision-making.
I know that requires some extra work on your part, but trading is WORK, and if you are not ready to commit time, don’t waste your hard-earned money.
3. Have a minimum RRR
Use the Reward:Risk ratio as a filter. Before you get into a trade, think about where your stop loss will go. Then, look left and identify important price obstacles such as support and resistance levels, Moving Averages, highs, and lows, etc.
If you have to trade through important price levels to achieve a decent RRR, then the risk may not be worth it. And if you cannot get a high enough RRR, then the trade can ruin your trading performance because the potential payoff may be too low.
4. Avoid unforced errors
As traders, we deal with lots of uncertainties and things that are outside of our control. However, there are a few things that are fully under our control. And our job is to make sure that we don’t mess those controllable things up.
If we break our trading rules, enter too early, add to a loss, risk too much, don’t take profits because of greed, or delay the loss taking because of fear, then those qualify as unforced errors.
Only you are to blame for making such mistakes, and no one has forced you to make bad trading decisions.
Once you can minimize unforced errors, your trading performance may skyrocket.
5. Collect screenshots
I have collected thousands of trade and chart screenshots from my backtesting, strategy development, and idea generation.
Such a screenshot archive is a great resource for your pattern recognition game. The more you expose yourself to the specific chart patterns that you want to master, the faster you will get good at it.
I would recommend starting a screenshot collection right now. Create new folders for your trades, your backtests, and charts and setups that you find generally interesting and worth studying.
6. Learn to trade with a 50% winrate
This may be the most important mindset shift any aspiring trader must achieve. Among the top three reasons why almost all traders quit is because they can`t accept losing.
You hit your first losing streak and are ready to change the strategy. You have two losses in a row and suddenly get emotional and risk too much. Doubts creep in after an unprofitable month, and your judgment gets clouded.
Even traders that are exposed to a potentially profitable trading system will often quit at the first losing streak.
Read the Market Wizards, listen to trading podcasts, and hear what the top traders all agree on: trading with a 100% winrate is unrealistic and a dumb pursuit.
This is why you have to learn how to lose. No matter how good you are, you will lose frequently. The better you can take losses, the better you will be as a trader.
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1- These users thanked the author Ogee for the post (total 5):
- Krunal Gajjar, 太虚一毫, BeatlemaniaSA, Mrs.Watanabe, Forexlearner
