I have been fortunate to get the opportunity to participate in some great stock market environments over the past 30 years.
I started in the early nineties building capital and letting it compound. I started as an investor in mutual funds, moved to individual stocks, then high growth stocks and trading price action, swing trading, to trend following, and finally to equity options.
I was fortunate to be blessed with some parabolic bull markets in the late nineties and 2003-2007 that covered up much of my learning curve. I had a huge drawdown in trading capital from 2000-2002 but the lessons I learned there enabled me to sidestep any permanent losses in the 2008-2009 melt down.
I always had a big aversion to losses that really saved me from ever blowing up my first trading accounts like most new traders do because they lack an understanding of the risk of ruin. From the beginning I always cut losses short because I hated to lose money. I also had a natural appreciation for making money and let winning trades go as far as they would.
Much of the first money I made in the stock market was just luck. I was in the right market environment doing the right thing so the profits just happened. Much of the past ten years has been an effort to quantify everything I did to make money and transfer my luck into skill.
“Patience is power. Patience is not an absence of action; rather it is “timing” it waits on the right time to act, for the right principles and in the right way.” ― Fulton J. Sheen
Here are twenty things that I learned through actual trading that have dramatically helped me to be consistently profitable in my trading through skill.
1. You have to have passion for learning to trade; passion is the energy that you need to take you to your goals.
2. You have to have the perseverance to keep going after you want to give up. 90% of new traders quit when they were very frustrated while 100% of successful traders didn’t quit until they reached their goals
3. New traders spend too much time looking for what to trade instead of focusing on who they are as traders. You have to know who you are as trader first then you can start building your trading system.
4. Traders have to be able to manage their stress by trading inside their current comfort zone. Traders have to grow themselves and trade size step by step.
5. The vast majority of new traders fail simply because they did not do their homework before they started trading.
6. A trader has to build a trading system that matches their own personality and risk tolerance levels.
7. A trader that chooses to be master a specific type of trading method or trading vehicles has a much better chance of success than the traders that just dabble in many different things and never make much progress.
8. A trader has to write a good trading plan while the market is closed to guide their trading while the market is open.
9. A trading plan has to be followed with discipline to have a chance at success.
10. A trader has to manage their behavior by acting consistently with their own rules.
11. “The answer to what’s the trend? Is the question “What’s your timeframe?” – Richard Weissman. All traders are simply trying to capture trends in their own time frame.
12. Never risk losing more than 1% of your trading capital on any one trade. Once you lose 1% of your capital you should exit the trade.
13. Be very aware of how much risk your total account is exposed to at any one time through position sizing and volatility.
14. Set your stop losses far enough away from your entry point to avoid regular noise and fluctuations. Find your stop level first, and then position size accordingly.
15. A trading plan has to be followed with discipline to have a chance at success.
16. The money I have made in the stock market was made through following the chart and the trend not from some prediction or opinion.
17. My biggest trading losses came from hoping, stubbornness, and bias.
18. My best trading has happened when I was the most open minded simply trying to answer the question: “What is the chart telling me to do now?”
19. If you have to ask others for their opinions about your trade you should not be trading you should still be in the process of study and writing your trading plan.
20. “If you diversify, go with the trend, and manage your risk, then it just has to work.” – Larry Hite