You just can’t beat the person who never gives up.” -Babe Ruth
You can read trading books until you are red-eyed, you can spend thousands of dollars on seminars, you can try to get successful traders to give you the secret sauce of trading and the Holy Grail. But, in the end it is simply you versus the markets. You have to pick your system, your risk tolerance, and take the heat in your own account, it will be your own money you lose or your own profits you gain.
No one can tell you the right system and method for you. If you can take draw downs in equity mixed with long term capital growth then trend following may be for you. If you love playing the hottest stocks in the market then CAN-SLIM or the Darvas Method may be the right systems for you. If you just have little patience and love action then you can join the few who have mastered day trading. There really is no right system for everyone, it depends on what you can handle, what your beliefs are about the markets and your own personality. However here is what all winning traders must have to win in the markets regardless of time frame, method, or system:
- They trade a robust system or method that wins more money over time than it loses.
- Their system gives them a risk/reward ratio that is in their favor.
- Their system or method is proven to work with a live trading record over many markets and trades or has historical back testing showing robustness through different market cycles.
- They manage the risk of ruin with correct position sizing and stop losses to avoid blowing up their account with a string of losing trades.
- They majority of professionals risk no more than 1%-2% of total account equity on any one trade. When this threshold is hit, they exit the trade.
- They never go all in and risk their account on any one trade.
- They do not risk more than 6% of their capital at one time across multiple open trades they have trailing stops in place.
- They have faith in their system or method and continue to trade it so they capture the wins even after large strings of losses.
- Almost all winning traders have come back from blowing up their accounts or losing a lot of money, they persevered while many others quit at the first big sign of adversity before they won. Successful traders make up their mind to be successful from the start, they have no plan B, they will be winning traders it is just a matter of the “how” they will do it.
- Most winning traders have learned to separate their trading from their self worth and ego. They treat it like a business. They bounce back very quickly from losing trades and get back in the game.
I know of many different types of successful traders, they all may win trading different ways, but all their systems are robust in the long term, they trade a style that fits them, they are traders not gamblers and take risk management very seriously. They have an undying belief in themselves and what they do, it is hard for the market to beat a trader who never quits learning and never gives up.