Through this trading blog, and working at a hedge fund, I have talked to many professional traders over the years.
At some point in the conversation, we get into the story of how they became a successful trader.
Although their individual paths to trading success were very different, I have noticed that they usually followed seven basic steps.
If you don’t believe me, go back and listen to all of my recorded interviews.
Even if you do believe me, you should do it anyway.
There is a ton of educational value in those interviews and they are always inspirational.
But if you don’t have time to listen to several hours of recordings, I’ll give you the shortcut.
In this post, I’m going to give you the roadmap that almost all professional traders that I have talked to, followed on their path to success.
Hopefully this post will show you where you are on the path and inspire you to keep going, no matter how hard it seems.
1. Be Grateful
I just read a great book called The Happiness Advantage and it provides a lot of evidence that happiness leads to success…not the other way around.
…and happiness starts with being grateful.
Whenever I talk to professional traders, I usually get a sense that they are deeply grateful for what they have. Not all traders are like that obviously, just as not all NBA players are over six feet tall.
But gratitude greatly improves your odds of success. Otherwise, you will always be looking for the next big thing, no matter how much you have.
So work hard, but also take some time out to enjoy yourself.
Go get a massage or go do something you enjoy.
You will be better for it.
2. Decide to Trade
This one is the big key. You need to decide that you are going to figure out how to trade successfully, no matter what.
Most traders genuinely enjoy trading, some just do it because they can make a lot of money and don’t have to report to anyone. But they all decided that they will become successful.
For some, it took a life changing event like cancer (Adam Jowett), for others it was the next big challenge in their life after professional athletics (Chris Lori).
Whatever the case was, at some point they decided that they would sit down and make it work.
If you want to reach your goals, you have to do the same thing.
3. Get Educated, Try Different Things
The next step is to get educated.
Free education is great, but many times, it is not specific enough. You really need to find someone who is trading for a living and learn from them.
Many times, that means paying for online courses. Sometimes you can find someone to mentor your for free, but that takes a lot more legwork.
…or you could be like Rafael Veron and work entry-level jobs to get an education.
Whatever the case may be, learn from someone who is actually doing this stuff for a living. Not some generic article you read on the internet that has no experience behind it.
But getting educated is easy to do.
A lot of people get educated.
The next step is where most people quit…
4. Figure Out Your Trading Personality by Taking Action and Getting Your Ass Kicked
A small number of people who email me from this blog never end up placing a demo trade. That is why I wrote this post.
Blows my mind…they have all these questions that could easily be answered by opening a demo account and taking a few practice trades. There is not money at risk, so why not?
I have no idea why they are reluctant to do so, but if that is you, stop reading right now and go open a demo account. If you are serious about learning to trade profitably, you need to take action.
Open a demo account with Oanda (they don’t expire).
Test your trading method…hard.
Of course it is possible to take a little too much action, and you shouldn’t take too much risk with real money.
A majority of traders that eventually made it, blew out their account at some point…sometimes more than once.
This topic came up last week when I was talking to Walter Peters. When he was first learning to trade, he said that he was blowing out accounts:
“…left, right and center.”
But he eventually figured it out.
Which brings me to my next point. Figuring it out what “works” in trading is always about finding out what works for YOU.
I call this figuring out your Trading Personality.
If someone is trading for a living with a particular method, the method obviously works. But if it works for you, will be an entirely different story.
I didn’t understand this for years.
But when I finally figured it out, my trading finally started to turn around.
My Trading Personality favors more technically based systems that are on a swing trading time frame. So I don’t learn day trading methods because I know that they will never work for me.
That significantly reduces the number of courses I will take and that will help keep me off the Trading Silodrome.
Chris Capre has some great courses that contain trading systems that span from the 3 minute chart to the daily chart. I primarily study his daily and 4 hour methods and ignore the rest.
Kim Krompass is a great trader and a cool person. But I didn’t take her training because she is a day trader. That just wouldn’t work for me.
I recently had a great conversation with Jarratt Davis. He kept failing (and even quit a few times) until he figured out that trading fundamental data works best for him.
So believe me when I say that it is not enough to simply take a bunch of courses. Be aware of what general types of trading methods resonate with you and what doesn’t.
That will allow you to narrow your focus in the future.
5. Focus on One Method at a Time and Test It
Now that you have a good idea of what will work for you, it is time to start testing. But don’t try to take on too many strategies at once.
Learn one method at a time and take the time to master it, before you move on to the next one. Sounds simple enough, but when you want to make money really badly, you will try everything at once and nothing will work.
Ask me how I know that….
6. Throw Out What Doesn’t Work, Keep What Does
When you find something that works, be sure to stick with it.
When a system has a drawdown, it can be easy to give it up and look for something else.
But you took the time to test it and you know that it has a statistical advantage.
Why would you give that up?
You have to give the system time to work in your favor.
On the other hand, if something obviously isn’t working, don’t stubbornly stick with it.
Get rid of it and move on.
Similarly, if you find a method that works better than your current trading method, consider getting rid of the one that does not perform as well.
You could be wasting valuable time and mental capacity by trading a lot of different systems.
7. Refine What Works, If Necessary
Even if a method is working, always look for ways to refine your method.
You don’t have to change the system completely.
It could mean that you just need to practice the system more to notice nuances that you were not aware of before.
If you trade a technical method, setup NakedMarkets and set aside some time to practice at least once a week.
If you trade on fundamental data, take some time to research economic reports that you don’t know anything about.
Conclusion
So those are the 7 steps to trading success, based on what I have observed from talking to many traders over the years.
I hope that this gives you some perspective on the process and how you can improve your trading.
