3 Simple Ways To Not Be A Loser Trader

A new year is upon us and it is always a chance for renewal. If 2013 was the year you chose to dive into trading and went off the rails, you can always regroup. For those that have been trying for years to make a go at it, the good news is that barring any massive capital loss, you can start again. Let’s take a look at 3 things that you can do to help improve your chances of making your next year, your year for success in trading.

Focus on One Trading Method

The internet, trading blogs, social media and all thing electronic are great but come with a price. The ready access to information overload is an ever present risk and in trading, more is not always better. Emails are crammed with system marketers that have “unlocked the trading secret that has been tucked away in a vault for decades”.

On a lesser scale, an article or blog post about an indicator setting has caused many traders to add that to their trading toolbox. Watching YouTube trading videos and how other traders perform can cause many to simply abandon what they are doing and they try to mirror what they are watching.

It’s a disease. Better said, it’s a dis-ease with the method they are currently using because they are not getting the results they want. Specifically, they are not getting the results other trader’s are getting.

I always mention the Turtles because it is a great example that the system is not the main component of success but the person using it is. Comparing your success or gauging your potential success on someone else is a fools errand. Understand that the road to trading full of potholes that house blown out accounts and failed dreams. Their failure, like the success of others, has no bearing on you.

Pick up 2-3 trading methods or systems that coincide with your goals such as day or swing trading, and run a back test with a random data sort. The one’s with potential, forward test them and the one that fits you is the keeper.

Take yourself off all email lists, stay away from trading forums and filter out all the noise (news reports, talking heads) that have no effect on your system.

When I did this exercise, I didn’t need the open/close of the candles so I used bar charts instead. There’s a lot to be said for noise elimination.

Continue your testing and only commit real money when you have a proven track record of success with whatever method you choose. The key is FOCUS.

Follow a Rigid Capital Exposure Plan

Going for the big one will more than likely blow your account. At the very least, it will set in motion a pattern of haphazard trading with the mindset of a hobbyist that has little chance of success. This is one habit you don’t want to have to contend with. Approach exposure like a professional from the beginning and don’t try to load the boat on a trade that is “destined for massive success”.

Equity curve pointing south? Don’t try to turn the corner on the next trade. Realize that the markets will be here tomorrow and you can chip away at those losses. There is another day to slowly turn the curve in the right direction.

Commit to a modest .5-1% exposure per trade or something even smaller. Just make it small enough that you can withstand blows to your account that come from foolish mistakes and trades that simply lose.

Set an amount that you will have for maximum account exposure across all open trades. This is particularly important for Forex traders who can easily trading 3,4,5 currency pairs at the same time.

Review Your Performance Daily

This is so critical and can alert you to issues early on that can devastate your chances of success. I used a free screen recording software (camstudio) to talk through trades and even did recaps of my daily performance.

Answer questions such as:

  • Did the trades follow the method? Walk through the entire trade from start to finish.
  • Was my capital exposure plan on point?
  • Did I exit the losers according to the stop?
  • Did I stretch profit targets based on hope and greed?

I also print out a chart of setups and the completion of the trade. Even though it is just as easy to use screen capture software such as Jing, I still prefer the hard copy. Making notes right on the paper, I feel, makes a huge difference in knowledge retention.

These three steps may seem easy to do and that’s good….because they are. You just need the intention to do them. Trading is one of those rare professions that success or failure is all on you. It is not the fault of your broker, your charts, the talking heads or the Fed if you fail. Trading does not discriminate and really, it is up to you which side of the finish line you want to end up on.

Trade well.

For more updates from Mark and the team at NetPicks, be sure to visit their trading tips blog at NetPicks.com.