For more educational articles visit our Trading Education Center
5 Things You Need To Know
#1 Trading is a skill that you can learn
Were you born to be a trader? Most likely not. I was definitely not born to be a day trader. I learned what it takes to be a trader the long and hard way. Fortunately, I was in a unique position such that I was able to spend a lot of time analyzing what I was doing wrong, and then I was able to turn things around. Through this journey, I developed a perspective that not many traders have. What you need to know is this: if you have ever learned any skill in your lifetime—any skill that required you to master something—you can learn to trade successfully. The answers to your struggles are not “out there” somewhere. Many of you are reading this because you’re looking for that person that has the answer for you, but you already have the answer. Keep this in mind: if you've ever learned a skill in your lifetime, you can learn to trade. You just need to apply the same efforts.
#2 Clear the Clutter.
For just a few minutes, think about the skills you’ve learned and how you accomplished them. I’ve got some unfortunate news for you, and you probably won’t believe me. All of the information about day trading that you've been collecting has mostly been a waste of your time. In fact, most of it has added nothing but clutter to your trading life. In the process of turning my trading around, I got rid of 10 of the 12 monitors that I thought, up to that time, were absolutely necessary. To this day, I just use two monitors to trade. That's it. They're not even huge monitors. I got rid of all of the extraneous information. Sure, it all had some value, but it didn’t have anything that was directly attributable to me being a more successful trader. So, I got rid of almost all of it.
#3 Find an Edge. Any Edge.
You don't need a huge edge to be successful in trading. A very slight edge will do it. I don't like to use gambling as an analogy, because what I do is not gambling. However, in the gaming and gambling industry, the edge is only very slightly in favor of the house. The casinos know that over time, they're going to make huge profits. You don’t need a huge edge in trading, either. Traders just need to identify an edge and know how to exploit it when they see it.
The best part of having an edge? You no longer need to try to convince yourself to be disciplined.
Some of you may be surprised by that last comment, so let me explain. A few years ago, I stumbled on a Mark Douglas book, The Disciplined Trader. As I was looking at the cover, it suddenly occurred to me, "I'm not disciplined. I don't need to be disciplined. I just need to do my job." I had gotten to a point where I had so much confidence in my trading edge that I was not inclined to do the stupid stuff I used to do. And if I just keep doing it the same way, every day, I’m going to continue to generate a consistent income. I’m no longer inclined to let my emotions make decisions for me. My job is simply to execute my trade plan. The rest takes care of itself.
#4 If you think you’re close to being a winning trader, you’re most likely not
You might have, at some point in your trading, given up trying to find that trading system that actually works. Instead, you dig in to develop your own based on the years of information about trading that you have acquired. You probably have even had some success and started to think, “I’m so close, I just need that one last piece of the puzzle.” You work and work, thinking: "Golly, there's just one more thing that I need...just one." I hate to tell you this, but you're really not that close. The largest majority of us that attempt to create our own trading systems never quite get there. The trading landscape is littered with the corpses of traders that were “almost there.”
#5 Don’t try to hit home runs
If you could be guaranteed a 2 tick a day advantage every single day, what would be the limit to your income? Think about this for just a few minutes. Don’t cloud things up with, “Yeah, but what about this, and what about that?” Keep it simple; two ticks a day, and you quit trading for the day.
Most of us know that to try to get one or two ticks a day is pretty easy. It shouldn't be too hard. Most of us believe that we can definitely do that. So, here's what you want to do: try to focus on winning a one or two tick trade. Just win! The idea is just to put some wins on the books. After that, you stop trading live (or better yet, a “pretend live” simulation account) and continue trading in simulation mode (paper trading not using real money).
What you've accomplished is that you end the day as a winning trader! That already puts you ahead of most other retail traders. Whatever happens after that doesn't matter. I don't care if you just win five bucks. You have five bucks today that you didn't have yesterday; that makes you cash positive. Most of you reading this are already thinking, "Well, I can't make any money at one tick a day, that's just stupid. I need to make 30 ticks a day to make a living. I'm gonna start out trying to make 30 ticks a day to see if I can make a living at this trading thing." I’m here to warn you that if you do that, you're not going to see a lot of success. Like with any new skill you are trying to develop, you've got to start small. Start small, put it in the bank. Prove to yourself that you can win. You record the day as a winning day. I don't care what happens when you're simulation trading after that, your live trade is recorded as a winning day. The objective is to string together a number of winning days. Maybe shoot for 10 in a row, or 15 out of the 20 trading days per month.
You’ve now convinced yourself that you can be winning trader and have something to build a trading career from: a platform of successes.