Hello TEBers! In this post we’re taking a birds eye view of successful trading by discussing the 4 keys to trading. Now make no mistake, mastery of each one takes work and really cannot be done until you have learned the fundamentals on how to trade.
Yes, this is more important than chart patterns and level 2 quotes. Any relatively intelligent person can be taught to read charts. Not everyone has the discipline to stick to the rules of their trading plan and only take trades that meet their criteria.
Listen, I can already tell most of you are not taking this first point as serious as it is. From experience, this is the most important piece for being consistently profitable. Once you have created a solid trading plan, it’s your discipline that drives the execution of that strategy. Find any profitable trader who has been in the game more than 3 years and I promise you they will be one of the most discipline traders in that office/group.
Do you have the ability to DO NOTHING? The majority of your day will not be trading, it will be waiting for trade setups to materialize. Some days there will be many, some days there may only be one. Do not trade just to trade, it racks up costs and it is unprofitable over the long run 100% of the time.
3. Money Management
The simple and most important piece here is having a profitable risk-reward base for all of your trades. If you are not targeting atleast twice the profit of the potential loss you will not make money. I strongly suggest aiming for three times profit to potential loss.
4. Control Emotions
As traders we must keep our heads level. Trading on emotion is career killer. Let’s not confuse this with conviction. I want you to have conviction in your trading ideas. Acting on emotions, such as frustration leads to taking spontaneous trades that make no sense. I don’t care how many times a stock gave you an entry setup only to pull back, stop you out and then push back above your entry. Do not start revenge trading that stock.
I have a trading buddy who this just happened too. He has been trading since 1998 and it’s how he makes his living. He was trading Facebook the other day and he experienced my example above. It did it three times to him and he took three small losses in the first hour of trading and then the stock grinded higher the rest of the day.
What did he do? He took his three small losses and then didn’t chase Facebook (as frustrated as he was because his long idea was correct). He also didn’t waste time just watching it in frustrated and found trades on other stocks and wound up making some money on the day.
There will be days when several trades don’t go your way, if you can manage to make a little money on those days as well then you are ahead of the game!
Summary: 4 Keys to Trading
It’s difficult enough to execute all of 4 keys to trading when completely knowledgeable about trading, but as you can see it can be done. However, if you are trying to do it without a complete trading plan or understanding how to recognize setups then you are at an enormous disadvantage. Whether it’s here or somewhere else, please get educated so you have a trading foundation to build on.
The Active Trading Blueprint offered at trading education blogs is just that; a trading foundation. You can learn more about it here: ActiveTradingBlueprint
Remember, “Victory Loves Preparation”