Defining Trading Success
If you’ve realized by now, everybody will have defined trading success in different ways. Each of us according to their personal life situation, goals and temperament. This means that while most trading methods can have common characteristics, there usually is no “one” trading method that will work for everyone.
Some will want to be more active traders, others will want to manage their accounts on a daily basis, others will want a mix of different levels of trading activity. Some will live in US, others in Europe, Japan, Australia and other countries all over the world.
How can a forex day-trader in Japan trade the same currency at the same time as someone who’s living in Europe, with the exact same strategy or methodology?
Unless they are willing to wake up at odd hours to catch markets opening, they have to find a way to adapt their trading approach based on factors pertinent to their personal situation.
Different Risk Tolerance Levels
Traders also have differing risk capital levels to start with, and have different levels of risk tolerance. Just because Trader A can stomach a 40% drawdown on his account in a month, doesn’t mean Trader B can.
Some trading methodologies have different initial risk levels that small accounts simply can’t handle.
For example, a trade taken on the daily chart may have an initial stop loss of 200 - 300 pips. Even trading micro-mini lots, a trader starting with $1,000 may find that the trade risk is 3 - 5% and thus outside the risk tolerance levels for their account. Naturally, larger accounts will be able to accommodate more trading strategies and methodologies than smaller accounts.
While the basics of successful trading may contain the same elements, much of the journey will be about finding your own space while you are learning the ropes. That is, your own “niche” in the market place as a trader.
There is a lot of focus on trading strategies and systems because that’s the most visible aspect of trading. But the success of a trader encompasses more than just when to buy or sell. Even with the best trading system in the world, if you can’t execute it you can’t enjoy the benefits of it.
Getting To Know Yourself
Getting to know yourself as a trader is important, because it will help you identify your ability to handle losing periods, as well as winning ones. Why?
Trader A, who trades trends, will have to sit through strings of losers in a row when the markets start to go sideways. But he knows the moment when a trend breaks out, he’ll capture profits that will cover his losses and more. But not many traders can stomach this drawdown period without starting to tinker with their trading methodology, panic and get all flustered.
Trader B, who trades sideways market, while having incredible success selling tops and bottoms will start having problems when markets start to trend.
Developing the awareness and experience to tell when markets have truly broken out and started trending, or have moved into period of consolidation, takes time. Experience, market observation and actually going through these periods one bar at a time develops an awareness that simple back-testing or looking at charts simply cannot do.
This is a part of trading that is very difficult to understand and overcome at the beginning stages of a trader’s journey.
Going Through False Trading Beliefs
As a new trader, I had the belief that somehow, with the right trading system, I would be able to pick winners all the time. Even if I had losers, they would be like one out of ten or twenty trades. I can’t tell you how much this belief cost me in terms of emotional and psychological battering, not to talk about the money lost in trading.
Having the confidence to sit through strings of losing trades, and continue trading even when your past five to ten trades (maybe even more) have been losers comes through experience.
It was just one of the many beliefs that I had to work through as a trader, before moving out of the beginner and advanced beginner stage.
Theory and head knowledge is great, but as a human being, it’s extremely difficult to maintain emotional stability when you’re thrown into the deep end for the first time.
How then does this confidence come?
This confidence comes when you, as a trader, has gone through all the market cycles of trending, to consolidation, to choppy markets and reversals. You start to realize that no matter what is said about news, fundamentals or technical analysis, markets repeat themselves because people are the ones who trade the markets.
You would also have learnt how to handle yourself and your trading system as you begin to recognize market cycles changing. Unfortunately, trading success does truly come only with time, the right approach (for you), mentorship (if you can get a good one), and lots of experience and market observation.
It’s funny how when you have sat through market cycles for the umpteenth time, something just clicks in your mind and you see how “obvious” and “simple” it is to actually trade. But that’s because you have already paid the price, polished your trading and mental habits that work for you over the time you’ve spent observing and trading.
But that’s only the beginning of the next stage, where you truly start to work on and establish your trading systems that match who you are and what you want to accomplish as a trader for more consistent trading results. Until this point in time, you probably would have experience “success” as a trader in fleeting moments.
This is also a major reason why I strongly recommend any serious trader to start keeping a journal. Not just for trading reasons, but to expand their awareness of how their individual beliefs and behaviors affect their trading results.
One way of understanding journaling is like this:
By recording your stream of consciousness, you are mapping out your repeated thoughts and beliefs into “hard copy”. Thousands of thoughts go through your mind each day, and many of them are simply repetitions of what you believe.
When you start mapping out your thoughts, you are “forced” to confront your inner self and belief systems that are hindering your success as a trader. No one can continue to sit down day after day after day, confronting a problem they know exists, and not do anything about it.
Either they will stop looking at the problem and pretend it doesn’t exist, or they will finally take action to resolve that blockage that hinders them from accomplishing their trading success.
Because of my experience journaling (as well as many others in many vocations), I strongly recommend you keep a journal both for personal growth as well as for trading. And because I realize that there are thoughts in our heads that we feel may be “unacceptable” to society or our social circle, we may want to keep them in a safe place.
That’s why I personally use The Journal by David Michael. It’s truly a fantastic journaling platform that is simple and easy to use. It also keeps your thoughts private and locked away behind a password, and has many functions that are easy to use.
You can check out the features and software free for 45 days. If you like it, you simply continue after making a one-time payment of $39.95. Otherwise, just uninstall it and delete it from your computer!
Read More About The Journal Here
Are You Still Here?
If the amount of self-knowledge, market observation, testing and trading hasn’t scared you off trading by now, then given more time, perhaps you really might just take your trading to the next level.
Who knows, right? Not everybody is cut out to be a trader. And that’s OK, because you simply look for your success somewhere else.
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The previous article can be found here: