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The Ten Things Profitable Traders Do Differently

  
  Education
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The following 10 reasons may be why the 10% of long term profitable traders take the money from the 90% that are unprofitable. I see these differences in real life all the time. There is a big difference between profitable and unprofitable traders that usually comes down to homework, mental discipline, and risk management.10NUMBER

  1. Winning traders let winning trades get as big as possible before exiting. They have the really big winners to pay for all the losers.
  2. Winning traders have no patience for losing trades, they keep losses small. They know how not to give back their profits with big losing trades.
  3. They are focusing on trading actual price action not their own opinions or beliefs.
  4. They are experts on the trading vehicles that they trade.
  5. The trade with the trend in their time frame.
  6. Good traders know that their trailing stops are smarter than they are.
  7. Profitable traders know that it is their robust methodology that makes them profitable not any one trade.
  8. Winning traders are great risk managers. Their #1 concern is how much they can lose, their #2 concern is how much they can make.
  9. Profitable traders have put in the time, usually years and thousands of hours to learn what really makes money in the markets.

  10. Profitably traders have studied historical price data, chart patterns, trends, and price action.

     

Ten Bad Habits of Unprofitable Traders

  
  Education
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1. They trade too much.

2. Unprofitable traders tend to be trend fighters, always wanting to try to call tops and bottoms.

3. Taking small profits quickly and letting losing trades run in the hopes of a bounce back, is a sure path to failure.

4. Wanting to be right more than wanting to make money will be a very expensive lesson.

5. The biggest key to profitability is to avoid big losses. (sizing / risk vs reward)

6. Unprofitable traders watch (Blue Channels ) for trading ideas.

7. Unprofitable traders want stock picks, while profitable traders want to develop trading plans and systems.

8. Unprofitable traders think trading is about being right.

9.  Unprofitable traders don’t do their homework because they think there is a quick and easy route to trading success.

10. Unprofitable traders #1 question is how much they can make if they are right, while the profitable traders #1 concern is how much they can lose if wrong.

Learn To Lose

  
  Education
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Unfortunately, it is the sad reality that the majority of people reading this are not profitable traders. If I could single out the most common culprit for sabotaging your trading it would have to be not being able to take a loss. This is especially prevalent amongst new traders, but I’ve seen this single trading mistake cripple even more experienced traders. In fact, I’ve run across countless traders that are generally successful if not for a few outsized losses. The problem is that these outsized losses are what cripple your account and push you into the negative column. You will never be a successful trader, EVER, until you learn how to take a loss.

4 Types of Traders

  
  Education
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The first type of profitable discretionary trader is the one who has a natural feel for the market.  When you talk to one of these traders and ask them about their trading at some point you’ll hear them say something about ‘feeling the market was this way or that….’. These are traders who over the years have acquired a lot of implicit knowledge of the market and its participants. They understand what moves markets and they also have the required self-trust to act on their ideas and to protect themselves when they are wrong.  Their personalities allow them to have the self-trust to know their limits and believe in their capabilities. We could call them a ‘natural born trader’; and there are very few of them. Although Jesse Livermore eventually blew-out, he’s an example of this rare type of natural trader.

 The second type of profitable trader – or more accurately temporarily profitable – is the lucky trader; the trader who’s P&L is currently in an up swing but they’ll soon be negative. Often these traders either got lucky with a number of trades and can not replicate it, or they learned the habit of holding onto losing trades and they got lucky when those positions came back. This accounts for the largest number of “profitable traders” – but for these traders the money often leaves faster than it arrived. (more…)

Learn To Lose

  
  Education
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LEARN TO LOSEUnfortunately, it is the sad reality that the majority of people reading this are not profitable traders. If I could single out the most common culprit for sabotaging your trading it would have to be not being able to take a loss. This is especially prevalent amongst new traders, but I’ve seen this single trading mistake cripple even more experienced traders. In fact, I’ve run across countless traders that are generally successful if not for a few outsized losses. The problem is that these outsized losses are what cripple your account and push you into the negative column. You will never be a successful trader, EVER, until you learn how to take a loss.

Eternal Truths About Trading Success

  
  Education
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truthToday afternoon  once again  read  small book from the late 1800s written by Dickson G. Watts and reprinted by Traders Press. Entitled “Speculation as a Fine Art and Thoughts on Life”, the book begins with a description of the “qualities essential to the equipment of a speculator” (p. 8). Here is the author’s perspective, written well over a century ago:

* Self-Reliance – “A man must think for himself, must follow his own convictions…Self-trust is the foundation of successful effort.”

* Judgment – “…equipoise, that nice adjustment of the faculties one to the other…is an essential to the speculator.”

* Courage – “…confidence to act on the decisions of the mind…be bold, still be bold; always be bold.”

* Prudence – “The power of measuring the danger, together with a certain alertness and watchfulness, is very important.”

* Pliability – “The ability to change an opinion, the power of revision.” (more…)

The 10 Bad Habits of Unprofitable Traders

  
  Education
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The 10 Bad Habits of Unprofitable Traders

  1. They  trade too much. A major edge small traders have over institutions is that we can pick our trades carefully and only trade the best trends and entries. The less I trade the more money I make because being picky is an edge, over trading is a sure path to losses.
  2. Unprofitable traders tend to be trend fighters always wanting to try to call tops and bottoms, while they eventually will be right there account will likely be too small by then to really profit from the actual reversal. The money is made swimming with the flow of the river not paddling up stream the whole time.
  3. Taking small profits quickly and letting losing trades run in the hopes of a bounce back is a sure path to failure. The whole thing that makes traders profitable is their risk/reward ratio, big wins and small losses. Being quick to take profits but allowing losses to grow is a sure way to eventually blow up your trading account.
  4. Wanting to be right more than wanting to make money will be VERY expensive because  the trader won’t  want to take losses and he definitely will not want to reverse his position and get on the right side of the market because in his mind that is a failure, in a profitable trader’s mind that is a success if they start making money.
  5. Unprofitable traders trade too big and risk too much to make too little. The biggest key to profitability is to not to have BIG LOSSES. Your wins can be as big as you like but the downside has to be limited.
  6. Unprofitable traders watch BLUE CHANNELS for trading ideas. Just stop it. (more…)

7 Words for Traders

  
  Education
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  • Think risk first and profit second — Profitable traders view every potential and actual trade through the lens of risk or whether they are willing to truly accept the potential damage to their account as opposed to focusing on the potential reward of trades.7
  • Accept risk — Profitable traders truly accept the associated risks once they decide the potential reward is worth it.  These traders understand that in order to win consistently they MUST experience controlled losses.  They know that if they minimize losses and exercise patience with winners, they can reap incredible profits.
  • Think more/Trade less –  Profitable traders know that their profit on every trade lay in the short distance between their ears.  They understand that the siren song of securities is an invitation to trouble much of the time.  They spend more time assessing a security’s overall chart structure and identifying optimal transaction points rather than focusing on the physical activity of clicking an entry or exit.
  • Stalkers — Profitable traders are disciplined and patient.  They will pass up a good entry to wait for a great one.
  • Decisive — Profitable traders make decisions.  They know that as long as their decisions are framed properly (i.e. from a risk perspective), their first thought is generally the right one.
  • Forgetful — Profitable traders have short memories.  As we were told many years ago on a Wall Street trading desk, “If you have a losing trade, forget it quickly… the chance to profit is coming up.  If you have a winning trade, forget it even more quickly… the chance to give up those profits is coming up… stay in the moment.”
  • Group think — Profitable traders care little for any one trade.  They know they have already taken steps to minimize the impact of any single trade.  Instead they focus on groups of trades as groups are more indicative of their process… which is what’s really important.

6 Effective Ways to Trading Success

  
  Education
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1.  Identify if you really want to be a trader. Is this truly your desire?

Before you can develop persistence and eventually achieve success in the tough trading game, you need to first identify if this is truly what you want to do. If you are only doing this for the money then the odds of you making it through the learning process is very slim. You have to be ‘foolish’ enough through your initial losses to believe that you can rise to the top 10% of profitable traders. Most traders learning curves are measured in years not weeks so trading is more like getting a degree than reading a book over the weekend.

2. Determine your motivation. Why do you want to be a trader?

Motivation comes from a deep reason why we want to achieve or have something.  If you know why you’re doing what you’re doing, it gives you more energy to keep moving forward in learning and getting experience. If you are trading to make a quick buck, then you do not make that buck quickly you will join the quitters. If you are trading to have enough money to pay off your house in 5 years that will create the energy to drive you forward against the odds.

You can get through this first learning stage by writing down specifically all the things you want to have or accomplish through your trading.  List all your desires and wants, all the rewards that will come through you not quitting the trading game. This is what will get you through if your heart is in it. You need a very big bucket of carrots waiting for you on the other side of trading success to get through the whips the market will hit you with while you are learning.

3. Outline Your Definite Action Step

Identifying your wants or desires speaks of what you want to achieve.  Determining your motivation shows the reasons why you want to achieve what you want.  Outlining your definite action step is necessary to know howyou will be able to achieve what you want.

When you know how to get what you want, it makes it easier to achieve it.  To know how, it pays to do some research and planning of what needs to be done on your part.  Be specific on each step you need to take.  Identify at least two ways and plans on how you can achieve your goals.

4. Keep the right mindset, believe that you are going to be a winning trader. (more…)

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