There's one question that I get asked more often than any other.
It goes something like this…
I'm really frustrated because I've tried so many trading systems and nothing seems to work! What should I do next?
So instead of typing out an answer to every single email, I thought that I would take some time to collect all of my thoughts in one blog post.
If you are feeling frustrated with your trading, then this post is for you…
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You are Not Alone
Almost every successful trader has been in the position you are in now.
I have heard this story over and over and over, when interviewing successful traders.
Therefore, the first thing you need to do is forgive yourself and make peace with the fact that this frustration is just part of the learning process.
It's time to embrace the suck and move forward.
This guide will show you the best process I know of to reboot your trading in a clear, systematic way.
When you follow these steps, it becomes much easier to figure out where you are going wrong and how to fix it.
Step 1: Take Full Responsibility for Your Trading Results
If you are blaming someone or something else for your trading losses, stop right now.
Everything begins and ends with you.
So take a good hard look in the mirror and repeat after me…
I am 100% responsible for my trading results.
Here are some ways that you might not be taking complete responsibility for your trading results:
- Blaming your broker for running your stops
- Blaming your job for not having enough time to trade
- Blaming a trading course for not teaching you the right strategy
- Blaming your mentor for not giving you enough attention
- Blaming Tim Ferriss because he hasn't figured out a hack for learning successful trading in 4 hours yet
You get the idea.
So before you move on, you need to take extreme ownership of your situation. Even if something may not seem like it's your responsibility, take ownership of it anyway.
Have a backup plan.
Have a backup plan for your backup plan.
For example, you cannot control when your internet connection will go down. But you can have your broker's app on your phone so you can still execute trades. You can also figure out which coffee shops in your neighborhood have free WiFi, so you can still trade, even if your internet at home goes out.
If you want all of the rewards of successful trading, you need to be responsible for the not-so-fun parts too.
Step 2: Write Down Your Trading Strategy
Do you have a real trading strategy or are you just parroting the last trading guru you saw on Instagram?
I see a lot of traders start trading a strategy (with real money) that they learned the day before on YouTube. Usually, they only watched the video once and only have about 80% of the rules right.
I'm not judging, I've totally been guilty of that too.
But if you are wondering why you aren't getting the same results as the trader in the video, then this is one possible reason.
There's nothing wrong with getting a trading strategy from YouTube, a course or some blog. But take the time to write it down and go over the material several times so you are sure that you understand all of the rules to the strategy.
You need to start building a playbook.
An easy way to write down the complete rules of your trading strategy is to download this free worksheet.
I know what you will probably ask next…
But what if I trade several strategies?
Then focus on just one for now.
The one that you think has the greatest probability of success. For every strategy you add, your chances of success drop significantly.
It's like juggling.
Anyone can juggle 1 ball.
But how about 6?
That's much, much harder.
I'm not calling anyone dumb.
All humans have limits…including you.
Start with one thing at become a master at it.
Step 3: Figure Out if You Have an Edge
Now that you have your strategy written down, it's time to test that strategy to see if it actually has an edge.
Obviously, there are a ton of different trading strategies out there. But at a very basic level, most traders either have a technical or fundamental trading strategy.
If you have a primarily fundamental strategy, then see if you can get historical fundamental data to backtest your trading ideas.
Can't get historical data? Then you will have to forward test your strategy. Read this post to learn more about forward testing.
If you are trading a technical strategy, the read our backtesting guide for tips and tools.
Either way, commit to testing your strategies in a demo account or with backtesting software. If you cannot get positive results in testing, then there's no way that you will have an edge in live trading.
Step 4: Keep Excellent Records
This is super important.
In order to figure out exactly where your trading is going off the rails, you need to have as many feedback loops in place as possible.
It's like the gauges on a dashboard. Each one tells the pilot exactly what's going on with a part of the helicopter.
Similarly, your records will allow you to see exactly what's happening in every aspect of your trading.
So document everything you are doing.
Here are the records that you should be keeping:
- If you are backtesting, you should record every single test that you do in a spreadsheet. Yes, even the “bad” ones.
- Journal every single one of your forward testing and live trades. It doesn't matter what you use, just use what works for you. Here are tutorials on how to use Evernote and Trello.
- Also journal your missed trades. This will show you how much profit you are missing out on and more importantly…help you figure out how to stop missing out.
- Track your win rate in live trading and how it compares to your testing results. If there is a big difference, then figure out why this is happening.
- Record your physical and mental state when you are trading. You can do this in your journal as a qualitative entry, or you can use quantitative tools like Muse, a heart rate monitor, Apple Watch or NeuroTrader. Try to spot patterns in your readings that tell you when you should and should not be trading.
I know that it's a lot to track. But if you are dedicated to becoming a successful trader, then you should leave no stone unturned.
Take a look at what elite athletes do to train for their sport. That will give you some clues as to what it will take to make it in trading.
The “sport” is different, but mindset needed for success is the same.
Step 5: Adjust Systematically
Now that you have a process in place for tracking your progress, work on each step and don't move on until you have completed each step successfully.
If you hit a point where something isn't working, then don't give up and jump to a new strategy.
Simply backtrack to the last step and try to figure out what changed when you moved on to the next step.
You may have to experiment with a few different variations of your strategy before you find something that works.
Trading is not easy. But if want the rewards, you have to be willing to put in the work.
So if you are ready to reboot your trading and start fresh, first take a few deep breaths. In fact, follow this video to learn a simple exercise for reducing stress and frustration.
Now start at step 1 of this guide and work on each step until you complete it.
I understand that it's much sexier to skip directly to trading. But that's probably what got you to this point to begin with.
Take your time, focus on the process and the results will come.
If you need more help, this is exactly what we teach in our TraderEvo program.
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