How to become a successful trader

How to Become a Successful Trader (Part 1)

How do Successful Traders do it?

So just how hard can it be to enter the realms of the top 10% – to become a successful trader?

Have you ever wondered what the difference is? Between them and us? What are they doing that we are not?

Some time ago I scoured the web looking for answers where I managed to find out just what it is that places them in the upper echelons of the trading world, and here we have it.

Basically, a number of successful traders were asked the question of what, in their opinion, are the single most important trading elements, assets, or factors, that a trader must have in order to become successful. Taking scores of answers over many months resulted in the following list of which I hold great store.

But first let me explain that the original post I came up with was over twenty thousand words! A novelette no less. A normal blog post can be anything up to two thousand words, so I needed to do some major cropping. I also needed to present the theme as a series of blog posts to keep each one relatively small and not lose too much of the general meaning.

You are now reading Part 1 of perhaps 4 or 5 blog posts in the series. I hope to get them to you fortnightly. My one big wish is that they can help you in your trading just as they are helping me in mine.

Each and every component in the list is something that I work on every day. I can relate to what those successful people are saying so I work very hard to emulate them.

For your information, here is how the series will take shape:

Part 1: The Trader

Part 2: The Method

Part 3: Before the trade

Part 4: During the trade

Part 5: Risk

All in all there are about 25 items split into those 5 parts for you to consider. I was, and still am, trying to figure out why some traders are much more successful than others when all the same tools and knowledge are available to everybody.

I now know that there are thousands of such lists on the net so, for what it’s worth, here’s mine. I learn as I blog and it tends to stick if I write about some subject, it helps me as much as it hopefully helps you. Let’s make a start…

 

Introduction 

Advice is abundant in helping you become a success at trading, it’s all over the internet, and quite a bit of it is for free. However, how to distinguish between worth and worthless can be a nightmare for those just starting out on this fascinating journey.

Knowing how the top 10%ers tackle this fascinating subject can do no harm. The question is, do you simply want to throw your money away and then claim that you have tried trading and it’s not for you? Or do you really want to knuckle down and see what the business of trading is all about?

Some say that trading is largely down to luck, but I disagree strongly. You make your own luck through hard work, home-work, planning, and treating your trading as a business, plus organisational skills, chart time, and becoming a student of the markets and how to trade them. Successful traders have worked through these phases.

We mere mortals still have much work to do. They have already determined their style, their trading technique, everything to do with their trading. Maybe they can take things a little easier now as everything is in place, though learning never stops. For me, trading is an art form, not an exact science and therefore you must make your own luck by first doing the aforementioned hard work.

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We have had the 100 Do’s and Don’ts of trading in a previous blog post aimed at traders like me, and possibly you.

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So how do successful traders do it? What are they doing that we are not? This list is not exhaustive and in no order of importance where some items may be obvious, some not so. But please take note.

I brazenly state that I fully intend to copy whatever the successful traders are doing. I intend to work at it for all I am worth. Why would I want to copy somebody on Forex Factory?

I’d much rather copy what successful traders do. Yessiree..!!

We’ve all heard the saying that only about 10% of people make it in the trading business, personally I believe it is much less than that. Much, much less. So how do they do it? What does a successful trader do that I am missing out on? What sets them apart?

The market can only go two ways so how difficult can it be to make consistent profits?

Becoming aware of what the top traders do, and putting the knowledge into effective actions are two different beasts altogether. We can but try.

We need to make effective and proper use

of the tools and knowledge available to us.

Your focus needs to be for the longer term where you have all the pieces of your trading running like a well-oiled machine, and all finalised inside your own written Trading Plan. Your strategy, your stops, your position sizing, your trade entry, exits, trailing stops, what markets, what times to trade, etc, etc.

Let’s face it, it is all about making money and that is the bottom line, so I consider it a given that there is work (and lots of it) to be done. I recently spent two weeks studying nothing but stop loss placement. I recently spent three weeks, three full weeks, studying nothing but position sizing. This is what I consider to be time well spent in honing my skills. There is lots more to be done.

One thing I must stress is that in no way am I a professional trader, but watch this space… I am working VERY hard at it.

Anyway, let’s find out what those guys get up to.

 

Part 1: The Trader

1. THEY are not on an ego trip

Black Dog Forex successful trader

They are not trying to impress anybody but themselves, if that. If you look at most successful people they do not seek the limelight and remain humble people. The good traders simply wish to trade well employing the dedication, discipline, and patience of their art.

No matter what their win rate is, they do not broadcast the fact. Win rates are meaningless anyway.

They do not brag or boast of their abilities and you will often find them trying to assist other traders who are not so successful, or perhaps struggling with some particular problem. Many successful people seem to exhibit these traits no matter what field they are in.

One redeeming feature is that they all appear to have great belief in themselves, their system or method, their style of trading, their trading plan, almost everything about their art is covered. If they have a weakness then they tend to work on it until it is eliminated.

This is what I am working on right now. Well … every item in this list, to be honest! I want to have every aspect of my trading to be as good as it possibly can get – and then some.

So, you have a string of losers…. so what? Every trader does. Do not let this unhinge your beliefs about your trading or methodology. It is simply the market. Winning periods follow losing periods – be ready for them.

As Alby says, more knowledge = lesser ego. Which, in my book, means more work. More work = more pay? Eventually the work will shrink as knowledge increases, and so will the pay-off.

Do you have the belief that you can make 20% per year from trading? 30, 40, 50%?

Whatever you believe, you are right. It is achieving that target that is the hard part. But it gives you something to work towards. Whatever problems you have with trading, you are also the solution. The answers lie within, not without. Look no further.

 

2. THEY are very organised

Starting with their work area all the way to their trading journal, nothing is omitted which could add to their the edge.

If you maintain the correct mindset from the very beginning then your star will surely be on the rise.

You will already be ahead of a great many traders. Don’t assign your trading plan and journal the main task of collecting dust, apply what they say and let them evolve accordingly. If you think you don’t need to be organised then please think again. It will only lead to your eventual ruin as a trader. 

HellOOoo, money is on the line. Start this task NOW.

This is your first step in becoming successful. Or are organised people just too lazy to look for things?

Being organised in your trading life is probably better left for another blog post. Nevertheless, we can highlight a few areas that we can look at to give us an idea how to set about this task.

  • Your routine prior to sitting at your work area. Shower, shave, breakfast, papers, walk the dog, send the missus off to work, etc…
  • Your trading desk must have a place for everything and everything in its place. This needs plenty of thought including your pc and connection.
  • Trading Plan. Is it up to date? No tweaks required?
  • Trading journal is up to date but have you studied the previous trades?
  • News website is open? Or the TV news channel on the go?
  • Times for trading and times for regular breaks
  • etc. etc. etc. 

 

“The easiest thing to do is prepare.

If you don’t, on behalf of the other market participants, we thank you.

 

3. THEY shoulder responsibility, and are very disciplined

Discipline

Nearly every successful trader mentioned discipline at some point. Your trading plan, trading method, or anything else connected to your trading is pretty much useless unless you have the discipline to carry out your rules.

You must be completely disciplined, not partially, which is the same as someone saying that she’s half pregnant..!! You are disciplined or you are not.

Tunnel vision, 100% focus, and extreme discipline are not required to be applied to the whole trading day as it would drive you nuts. They are required, however, once a trade is underway. You must be that sniper. That is when your trading plan comes into its own.

Your discipline in applying your own rules is the answer. If not, then your trading plan is just so much waste paper, and time.

Improve your trading gradually, don’t quit, and be committed.

Most successful people are very disciplined. I particularly liked what Theodore Roosevelt had to say, “With self-discipline, all things are possible. Without it, even the simplest goal can seem like the impossible dream.” He described it as the one quality which sets one man apart from another. The key.

Your trading plan will be worthless, meaningless, and a complete waste of time if you do not have the discipline to actually carry out and follow through what it states. Your success depends upon you following what you have written inside your trading plan. It has been painstakingly devised over a considerable period of time so it is crucial if you expect the longed-for success to follow.

Failure to follow your trading plan, with discipline, suggests that you could be trading with emotions. Hmmm, we know what that means. Very dangerous.

Your trading plan has been devised to avoid just this sort of situation. Tweaking of your plan is allowed, in fact recommended, but…. during a trade?

Your well-documented trading plan should cover EVERY aspect of your trading, which is why it should be applied with discipline. If you manage to do this then surely success will follow.

 

Having trading discipline is the beginning.

Keeping discipline is the progress.

Staying disciplined is the success.

 

Responsibility

With discipline comes responsibility where, with every decision or action that you take, then you must be responsible for them. The successful trader blames no-one but himself, if indeed there is blame to be apportioned.

All traders make mistakes, when this happens find out why, learn from it, and swear it will never happen again. Warren Buffet blaming someone else? I don’t think so.

Someone who looks for excuses is looking for a way out. Unfortunately, there is no way out. The buck stops with that trader. The successful trader will want to learn from it, not make excuses. He may review his trading rules, but this is doubtful. The chances are that he will have overlooked something, maybe missed a news announcement, but he WILL get to the bottom of it.Black Dog Forex successful trader

If you drive a car on the road then you have to follow rules. If you play a sport, there are rules. Do not follow those rules and you may have an accident or lose a game. With trading it boils down to money, the loss of.

The guy who follows his rules with discipline, is the guy who is taking money off you!

The beauty of trading is that you can make your own rules once you have worked out which ones offer the best chance of success. But can you stick to those rules?

Today is the first day that you start to weld yourself to those rules and never stray.

 

4. THEY are realistic

The successful traders know their limits as regards profits for the month, or losses for that matter. They know roughly how many trades per month they will take, they know roughly how many of those trades they will win because they keep good records and a good trading journal. They set their stops and target prices so they do have a pretty good idea how they will fare for any particular month given normal trading conditions.

Becoming rich overnight is not going to happen, unless you risk a large percentage of your account. The successful trader would not even entertain this scenario as they know that this is the main highway to account destruction.

In fact, you are unlikely to become a successful trader if you harbour those types of unrealistic expectations. What does this mean?

Well, there is nothing wrong with writing down your aspirations in your trading plan – goals, targets, aims. Though hoping to quit your job and trade full time with a small account won’t hold water.

Start with realistic targets such as:

Next year I hope to make enough from trading to buy a new car.

I hope to make enough each month to pay the mortgage.

It would be nice to treat the better half to a nice two-week cruise.

… and things of that ilk.

Aspiring to make a million in your first year is a bit much, to be honest. There is so much work to do.

Disposable capital

Ok, you now have your trading account. We now need to be realistic. If you lost the lot it should not affect your life style. This is known as your disposable capital.

Next, consider losing chunks of it. You must be comfortable in losing a small percentage of it on any one trade. I don’t mean happy, just comfortable. But chunks?

This is where position sizing comes into play, and this is MOST important. Please get to know about this.

Let’s face it, if you want to risk 10, 15, or 20% of your account on each trade then it really is asking for trouble. You are not going to last very long.

Get yourself organised and learn about position sizing, get yourself disciplined and carry out what you have learnt, then be realistic and have realistic targets for the size of your account.

If you wish to ‘wing it’ then please, PLEASE, trade against me.

 

5. THEY are extremely patient

Now, this one is a biggie. Patience and Discipline. The two go together nicely. And with discipline we can add responsibility.

At Black Dog, we let the trades come to us, we do not go chasing trades. No revenge trading or other account-busting actions. We are always screaming – P&D P&D.

Nevertheless, there are losing trades which are simply considered part and parcel of doing business, just a part of the game, but they are calculated risks where the losses are relatively small.

Patience will pay you in the long run, which reminds me of another saying among traders, “be quick to take losses, slow to take profits.” Seems right to me.

Having the patience to wait for the best productive set-ups is a primary factor, but not the only one. Patience during the trade can affect profitability too. A successful trader will wait for their strategy to tell them when to exit, or a pre-determined target price. Professionals often aim for the middle third of any given move.

Whereas us lesser mortals often take profits far too early thus affecting our bottom line.

Yep, this one is certainly a biggie. You MUST exercise patience in bucket-loads, it is a key factor in trading. Waiting for the correct set-up, then waiting for the correct price, then waiting for the correct exit price all tests our patience to the limit.

Again, we are always reminding traders of this on the Black Dog site. P&D P&D P&D. Patience and discipline.

Black Dog Forex successful trader

 

6. THEY are always willing to learn

The trading industry is absolutely huge, with vast amounts of money changing hands on a daily basis. Your job is to grab a cut of that vast amount for yourself with whatever means are available.

New ideas materialise from time to time and, although most may not apply to you and your style of trading, it is always a good idea to keep abreast of what is going on because there are always nuggets of good info where and when you least expect it.

News sites, forex blogs, and the better forums, Facebook groups, are all good places to keep up to date. The good traders are always learning, always gaining knowledge.

Work hard at working hard at learning the trading game. Of course, this learning never stops. You must keep at it.

The fact is, you cannot become a successful trader, or even a half decent one, until you have bags of learning time under your belt.

Is there a time-scale to becoming a successful trader?

I’m not sure, but going on my experience your first year or so will be spent losing (three accounts, in my case) but learning invaluable lessons that became deep-rooted. I found that there were several light-bulb moments along the way that still serve me in good stead. I will never forget them.

If you are simply chasing the staggering profits that trading can throw at you then there may be troubled waters ahead. However, if you chase the money but are prepared to learn at the same time then there is much hope.

By the end of the fifth year I still hadn’t bought my south sea island. But I had started to put the Black Dog system together and things only got better from there on in. I could now say the famous words, “I know what I am doing!”

Light bulb!

One big light bulb moment was realising I had to get away from those stupid forums. They taught me one thing only – how to lose..!!

Education is the answer, the only answer. Get yourself as many GOOD trading books as you can find. Be hungry for knowledge. Avoid books or webinars with ‘Shocking Discovery’ in the title, or ‘Double your account in a year’ or ‘Secrets of …. blah blah blah.’

The truth is that there are no more secrets or shocking discoveries – it’s all been done before. Thousands of times. The answer to the secret of trading lies within YOU and how you prepare yourself.

How do I prepare myself?

 

I look at each heading in this series of blog posts and work very hard at getting to know EVERYTHING about each one and how I can apply that knowledge to my own trading. It takes time, of course it does.Black Dog Forex Successful Trader

I may spend a week or a month on any particular one, but that doesn’t matter, it takes as long as it takes, because I want to emulate those top traders. I want to be in that group. It is time very well spent.

Or do I copy some idiot on Forex Factory who will teach me how to lose. Nope, I want to know how the best traders go about their business, I want to copy them, I want their knowledge, I want, I want, etc…, thank you very much.

 

Being ignorant is not so much a shame as being unwilling to learn.
Benjamin Franklin

 

 

Conclusion

The Successful Trader certainly has these traits

There are probably a good few more points that could help us to become far better traders before we even start to look at price charts, but these are certainly a very good start. They are what the top traders suggest. They have worked to attain these levels. We should too.

I, for one, will be taking note of what they say. Who am I to argue with them?

Choose one of the headings and try to work with it for a week or two, the longer the better. Try it long enough so that it starts to feel like a natural state of affairs, as though you have been doing it for years. Be honest with yourself because it is, after all, your money at stake. The more that you can do to increase that trading account of yours, the better you will feel.

Nobody said trading is easy, but you can make it easier on yourself by gaining the skills necessary to become a successful trader.

  1. No egos
  2. Be organised
  3. Show responsibility and discipline
  4. Be realistic
  5. Have extreme patience
  6. Non-stop learning
  7. Use your own intelligence, not that of others

There is nothing difficult in that list – or maybe there is? This is what the top traders have in common so I’ll be looking very carefully at every item, given time. Please join me.  

Coming up next…

Part 2 is where we can look at what the top traders think about their method and what they have done to be successful.

1 Comment

  • Ronald Lucraft

    22/07/2017

    Excellent, excellent and excellent Dave, this blog should be the first stop on the journey with a regular return for a top-up re-education.

    Many thanks for putting in the formidable leg-work to bring all of this very necessary knowledge to us.

    Cheerz,

    Alan

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