successful trader

How to Become a Successful Trader (Part 2)

In this post we can talk a little about the way that a successful trader looks at the markets and how they utilise the exact same tools and knowledge that is available to all other traders, (you and I).

Not so much in what they use, as how they use it, also bearing in mind that they are organised, patient, disciplined, realistic, together with learning about their art non-stop.

One thing I forgot to mention is that I’m not the greatest writer in the world. If there is anything that looks a bit dodgy. Please forgive me….

Although the headings in this list are pretty straightforward and have probably been mentioned thousands of times over the years, please do not take them lightly. After all, the concepts are what the top traders themselves have said is what makes them successful, they have totally grasped the ideas. It is why they ARE top traders.

We had better take note of what they say. Maybe we should do some grasping of our own.

I have spun these words into some sort of order, but please remember that this entire list does not come from my pen, so to speak, though I have embellished a little with my own thoughts. The better traders in this world have given me the idea that we also need to know how. I am simply the messenger.

Every post in this series will also have the confession that I intend to copy them without remorse. To work very hard on each one til the cows come home. I only hope that you too will reap the benefits. 

 

Part 2: The method

7. THEY do not rely on news or fundamentals

They say that everything, including news releases, and announcements, or when some high profile person makes a speech, is already factored into the price that you see on your charts. I believe this.

When price really does start to motor, then the news was not as expected.successful trader

Some traders do trade fundamentals (the ‘funny mentals’) and that is all well and good, they have an interest in that type of trading. Though most do not.

The successful trader will be aware of when the major announcements are due and will trade accordingly. Maybe tighten stops or close the trade altogether.

From the traders who took part in forming this list, none of them took an interest in fundamentals. They simply have a plan on how to trade around the major news.

Of course, the really major events such as Brexit, the US presidential election, etc. can send the market haywire for many hours. Best to be prepared.

 

You may not fully understand it right now but the market is always right.

 

Anything and everything that could affect the market, or chart, that you are looking at is already factored into the current price. What price you see is ‘right’ and is only affected by unexpected news etc., mentioned above. Of course, unforeseen things can happen at any time which could send the price ballistic. Such as certain devastating acts of god, acts of terrorism, war, and the like. Events that no-one could predict. 

 

8. THEY may use indicators but do not rely heavily on them

It took me years to actually get my head around this one. I was of the same school as almost every other trader. You know, the ones who think that indicators are the be-all and end-all of finding good entries?

WRONG..!!

And getting wronger all the time.

Amateurs are in the never-ending search for the Holy Grail, which they think is an indicator, or combination of indicators, that will provide the riches. They use the same indicators that have been passed down from losing generation to losing generation.

Top traders KNOW that they are almost worthless and base their decisions largely on their experience. In my efforts to copy the successful traders, I also am making gallant efforts in this direction. Clean, simple, uncluttered charts.

We all know about the indicator fetish…

successful trader

 

At Black Dog, we trade a ‘footprint’ of the market, our indicators are there only to show us if that footprint is in the correct place. Indicators will only make a mess of your charts, your trading brain, and your decisions. Please try to copy the top traders and minimise indicators on your charts.

Yes, I know that every trader has to start somewhere in trying everything out there, including EA’s. It’s an expensive lesson that we all pay for. The better traders will soon realise the futility of using those items loved by all brokers.

Most will give up on the fantastic trading opportunities and leave this great industry altogether, but a few, not many, will see the light.

 

If most traders would learn how to sit on their hands 50% of the time,

they would make a lot more money. Bill Lipschutz

 

9. THEY do not trade 24/7

Or indeed 12/7 or 12/5. Possibly not even 8/5. I’m being silly now, but you get the point.

What does it take to become successful? Trading non-stop, all waking hours? Nope.

You gotta trade when the markets are at their most productive. London session, New York session, and when they overlap are the best.

As mentioned earlier, I spend quite a bit of time at the computer but I’m not staring at charts all day long cos I have other things to do. Thank heaven for our alarms.

It’s a fallacy that the top earners spend all their waking hours looking for trades. Once they are organised with their strategy, trading plan, and all that goes with it, then they are looking to trade when the market is likely to offer the best results. You must remember that you have a life outside of trading too.

Being in front of the screen all day long could also make you stale, you need to be feeling on top form to tackle the markets.

Your goal, your target, your aim, is to make money whilst trading. Nothing else. But this should not be at the detriment of having a life. Remember, standing aside is a position.

 

Traders who can both be right and sit tight are uncommon.

I found it one of the hardest things to learn.

It is only when this is grasped can a trader make big money.

Jesse Livermore

 

successful trader

Try to have a life outside of trading too

If you are at the charts trading non-stop, day after day, the chances are that you will become stressed too. I doubt if you will find a successful, highly-stressed trader.

Yes, trading can be stressful, though eliminating most of the factors that cause stress will lead to a better trader. Those that trade gazillions seem to be of a different mind than most of us.

I can feel the stress building if I have $500 on the line, though I fight it. Knowing that emotional trading will do nothing for my account and is just about as good as gambling, I can see where things are leading if I let stresses into the equation.

If you are a full time trader then you must treat your trading as a business – work 9 til 5 then relax. Have a life.

I realise that when you are getting things all worked out from the beginning then you will tend to work at it all hours until everything is set up. No problem with that. I certainly did the same. But thereafter take things a little easier.

Being stuck in front of the charts all day not only makes you stale, and may raise the stress threshold, but the chances are that your fingers are itching for something to do which could lead to mistakes, and costly ones at that. You’ll probably see things on the charts which don’t exist.

 

10. THEY have a trading SYSTEM

A Trading System – as opposed to a trading method, or strategy.

The method or strategy will form a single part of your whole system. My Trading System comprises every page on the Black Dog website. It describes everything that I do concerned with trading.

Your Trading System encompasses EVERYTHING about how you trade. It covers the lot. It should be a written document (or typed) which covers absolutely everything about how you trade, why you trade, when you trade, everything. It is a tweakable document as you become more proficient.

 

Copied from a dictionary describing a ‘system’

An ordered and comprehensive assemblage of facts, principles, doctrines, or the like, in a particular field of knowledge or thought.

Also, an assemblage or combination of things or parts forming a complex or unitary whole.

Examples being: a mountain system, a railroad system, a system of currency, a system of philosophy, a TRADING SYSTEM.

 

Briefly, your trading system should be a document written by yourself which encompasses EVERY aspect of your trading and may include:

A trading strategy or method.

Position sizing

Times to trade

Trade and risk management

Your trading or work area

How you keep up to date with trading in general

And much much more.

THIS IS YOUR TRADING PLAN – WITHOUT ONE, YOU WILL FAIL.

 

successful trader

There are other headings you may wish to add, e.g., your work area, breaks, holidays, when you will trade, etc. It is simple, add what you think is important to your trading.

Believe it or not, what is inside your trading plan will determine whether you become successful or end up on the very large pile of failed traders. For having a trading plan and not following what it says is tantamount to not having a plan at all. That will be failure confirmed.

Probably as bad is copying the trading plan of someone else. It just will not work. At Black Dog, we do not give you a trading plan, but we do make suggestions of areas that you may want to focus on. There is NOTHING like your own Trading Plan. If you want to take trading seriously then it is a must-have item.

 

successful trader

 

To become a successful trader, you must become a master at every aspect of your trading plan – your charts and what is on them and why, and what they do. Your plan may include position sizing (if you are wise) so become a master at that too. Trading can do wonderful things for you, but you must work at it if you want it to be a success.

 

A trading plan is nothing but words unless you act on it.

 

Probably a significant part of your Trading Plan will be your trading method. This is the way that you view charts, how you make your trading decisions, and how you enter/exit the market. This your strategy.

 

11. THEY use a very simple strategy, or method

By this, it is meant that they use a simple strategy or method to enter the market, or make a trade. Nothing complicated. Their charts are usually crystal clear of all superfluous rubbish.

I must say that I have been advocating this idea from way back when. This is one item on the list that I have no trouble with and have been working on it for years. It’s one of the old cliches, I know, but KISS is very important. Though at Black Dog we prefer KIBS. I have been fighting for years to remove stuff from my charts. I can honestly say that I am winning the battle. I know what everything is, I know what everything does.

The look of a clear chart is a sight to behold.

successful trader

Most amateurs just keep adding stuff to their charts without really knowing what it does. You can see that on the forums all day long. Their charts resemble a Jackson Pollock.

If you feel as though you want to add crap to your charts – HIT THIS BUTTON >>>>

Not that I class myself as a professional, I just know that the less rubbish there is on a chart, the better will be the performance. Black Dog started way back in 2008 where I thought it was a simple system even back then. I didn’t want complicated. I have made it my life’s work to make it even simpler but without losing any of its potency.

That potency could be described as my ‘edge’ which I need to keep. Adding stuff willy-nilly will not do any good whatsoever. It is as simple as that. Yes, I’m copying the successful traders again. Why not?

You want me to go back to the freaky forums again? No chance!

Are the markets complex?

Maybe. Let’s look at how they move. Do they form circles and ellipses, form complicated crystalline shapes, dodecagons, heptagon shapes, or whatever? Of course not, they move up and they move down. That’s it..!!

I’m going to stick my neck out here and state that ‘up or down’ is not very complicated. Up and down. Up and down.

“Oh yes Fred, my system is very complicated. Been trading it for fifteen years. Not made a penny yet but high hopes, high hopes.”

If you really want to learn something from the online forums then go and look at the old posts from 5, 10, 15, or 20 years ago. They were figuring out how to use the self-same indicators way back then. Those guys have disappeared and no longer post because the indicators DO NOT work.

That’s why the brokers love you to use them and even put them on the trading platforms for you. For free! They are giving you the tools to fleece them. Like hell!!

Don’t spend years as I did working this out. Your eyes and brain are far more reliable than most indicators.

 

successful trader

 

Please remember that this is a list of what a successful trader is likely to concentrate on – they keep things VERY simple. The indicators are available to everyone, but not everyone uses them in such numbers on their charts. You may be surprised to learn how simple are the charts of the top traders.

 

Trading is as hard as you want to make it.

 

Love, love me do

Every single successful trader spoke about their strategy, in as much as their strategy fitted completely with their style of trading – it suited them. This is what you are searching for, a strategy that suits you.

How many different types of trader are there? Scalpers, day traders, momentum traders, swing traders, position traders etc. etc. The strategy used by one of those (even very successfully) would not necessarily do the business for any of the others. The successful ones all have a strategy that suits them. Often painstakingly honed to perfection over many years.

It is difficult to trade another person’s strategy, it may not suit, which is why at Black Dog we have several variations which can be altered to fit the style of any trader.

This is a very important point – your strategy must be to your liking, you must be happy with it, nay, ecstatic. Some traders will hold a position for months, while others, including yours truly, rarely hold a trade for more than one hour. It all depends on your style, including your patience, discipline, and temperament.

You actually need to fall in love with your trading strategy, one which you really enjoy trading. If you manage to achieve this state of Nirvana then you are well on your way. For me, Black Dog is my Nirvana.

Yes, I am in love…

A successful trader will have his own style

successful traderIt will probably take much time to get your loving strategy in place, but please spend that time and make sure you are in love, not in lust. Lusting after profits that is, before you have built the foundations to a fantastic trading plan.

For your trading plan will be built around how you trade your strategy.

If you think about it, trading a style that does not suit you will do no good for your confidence where the results could be mediocre at best.

I may be mistaken here, but I seem to remember Muhammad Ali talking to a small boy and saying that if he was a garbage collector, then he would be the best garbage collector in the world.

This is how you should view your trading strategy and style – BE the best in the world at what you do, or certainly strive in that direction.

The top traders are at the top BECAUSE they have found their style of trading and built their Trading Plan around it. Most traders have not found it and struggle to find a style that suits them. I’ll mention system-hopping, always buying into the latest software including those useless EA’s, even acting upon trading tips. If only they would look at themselves and get their style in order first, it would probably save them a lot of time, money, and heart-ache.

 

Just because the market is open does not mean you have to trade. Cash is a position too.

 

Our list is growing of how to become a successful trader:

  1. No ego trip
  2. Organised
  3. Responsibility and discipline
  4. They are realistic
  5. Very patient
  6. Always willing to learn
  7. Don’t rely on news
  8. Don’t rely on indicators
  9. No 24/7 trading
  10. A Trading System
  11. A simple Trading Strategy

Now we’re getting somewhere. We have enough to start work on. But don’t hang around because we are not even at the half way point in what IS going to make us all far better traders. It is. IT IS.

Shout that out. Because if you believe that you can, then you are half way there..!!

 

BELIEVE..!!

 

Link to the first post Successful Traders (Part 1) – (… in case you missed it).

Coming up next…

You may be pleased to learn that the next of this series, Part 3 Before the Trade – is the shortest.

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