When I mention to folks that I’m a full-time trader, I usually get a few concerned looks.
That’s because most people that try their hand at trading lose more than they gain. Then, they swear off trading forever.
But it’s not trading itself that’s the problem. It’s a lack of discipline.
Let me explain…
I prefer to think of trading as a vehicle that can take you to financial freedom or financial ruin.
If you drive the vehicle responsibly, the rewards can be life-changing.
But if you don’t take trading seriously, the consequences can be devastating…
You see, over the years I’ve coached and developed around 3,000 traders so far.
Many of these traders were professionals working with a proprietary trading firm, but plenty were also retail traders investing their own capital.
I’ve seen both successful retail traders and so-called “professionals” blow up their accounts.
The differences between good and bad traders have nothing to do with educational background or even what’s on their resume.
In my 15 years of experience, I’ve learned the most important quality a trader can have is discipline.
That’s why so many great traders come from military or athletic backgrounds. It takes a tremendous amount of discipline to succeed in either arena.
If you want to be a profitable trader, then discipline is a non-negotiable quality you must develop.
Apart from discipline, there are three key concepts all traders must know if they want to be successful.
Today, I’ll go over the first one:
Successful traders know that good trading is a game of probabilities not certainties.
Even the best trading strategy in the world won’t be right 100% of the time.
That’s why great traders understand that consistent profits can only be earned by carefully managing risk.
Let’s say you have a strategy that picks winning trades 60% of the time. That’s a great win-rate by any measure.
But even this strategy statistically has a 70% chance of hitting four losing trades in a row.
Meaning, you’ll eventually suffer through a significant losing streak.
You’ll never be able to predict exactly when you’re going to hit that streak. It could be after a string of winning trades, or it could be after you’ve just funded your trading account.
Most new traders get too cocky after winning several trades in a row. They take much bigger risks than they should… And wonder how soon it’ll be before they’re raking in the millions.
Then, inevitably, they hit that losing streak. But by that point it’s too late. They’ve almost certainly started to put too much into each trade.
Just like that, they give back all the money they’ve made and then some.
Most of them give up on trading after that.
However, those that stick it out have an opportunity to learn from their mistakes. If not, they’re doomed to repeat this cycle until they’re forced to call it quits.
I went through the same cycle, before I eventually discovered what it takes to break it.
Next week, I’ll share how I finally broke free and earned my way to financial freedom.
Analyst, Market Minute
How have you experienced this cycle in your own trading?
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