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10 Keys to become Consistent Trader and increase your Profitability

  
  Education
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  1. Think of trading as a business and have a trading plan.
  2. Make sure that the strategies you select, match your personality so you can follow them.
  3. Have a realistic expectation of what your returns are. Include all the costs associated with your trading business.
  4. Have an idea for your risk/reward ratio. Don’t confuse trading with gambling. If you are increasing your position, make sure that your strategy warrants it.
  5. Have trading rules and follow them. Think about them as contingency plans. Because when your emotions are very high, the tendency is that you make very poor decisions that can cost you your account!
  6. Be flexible to the market conditions. When you see the market as it is, you have a much better chance of managing your portfolio and increasing your profits.
  7. Take responsibility for your results. Taking responsibility does not mean that you have control of everything that happens. It means that you have a choice of how to react to the things that happen.
  8. Find out why you are in the trading business. If it is for the excitement of it, find other hobbies or activities that you can get your excitement from.
  9. Keep track of your performance. This is a way of objectively looking at how you are doing, what you did right and what you learned. Be gentle with yourself.
  10. One of the most important things that people don’t handle is their Emotional Risk. When emotions run high, the quality of decisions goes down. It is very important to learn how to react to your emotions and thus increase your profits.

6 Types of Traders

  
  Education
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  • Pretrader. Everything is new at this stage, and everything is difficult. This is the point where the trader is learning the very basics of charting and of market structure and is also just starting to explore the marketplace.
  • Novice trader. At this stage, traders are not trading to make money; they are trading for experience and to begin to deal with the emotional challenges of trading. One of the main signs of progress in this stage is that the trader will start lose money more slowly than before—still losing, but losing less often and less consistently.
  • Early competent trader. The first step toward making money is to stop losing money. A trader whose wins and losses balance out (before commissions) has taken the first steps to competence. (At this stage, the trader is still losing money due to transaction costs and other fees.)
  • Competent trader. The first stage of real competence is achieved when the trader is able to cover transaction costs with trading profits. Reaching this stage may take a year and a half to two years, or more. Consider this carefully—two years into the journey a realistic expectation is to finally have accomplished the goal of being able to pay for your transaction costs. This may not seem like much, but very few individual traders ever survive to this stage.
  • Proficient trader. Here the trader starts making money. Errors and mistakes are far less frequent, but, when they do happen, they are corrected and reviewed, and the lessons are quickly assimilated. The trader has been exposed to the stressors of trading so many times that they have now lost most of their emotional charge and is able to approach the markets in an open, receptive state. As competence grows, the trader can look to manage more money; developing the skills of trading larger size and risk becomes a focus.
  • Experienced trader. It is difficult to imagine a trader becoming a true veteran without living through a complete bull/bear market cycle—about a decade in most cases. This trader has finally seen it all and has also become cognizant of the unknown and unknowable risks that accompany all market activity. It is possible for developing traders to gain much of this veteran trader’s knowledge through study at earlier stages of development, but there is no substitute for experience and seeing events unfold in the market in real time.
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