What does it take to become a successful trader? By observing traders over the years, we have identified several common traits in those who achieve success. These eight steps will help you improve your skills and possibly start earning a steady income from trading.
1. Market Selection
The first step to successful trading is to choose the market you want to work with: currencies (Forex), stocks or futures. Each market has its own features and advantages, but it is important to consider how the chosen market fits your lifestyle. For example, currency and futures markets operate around the clock, allowing you to trade at your convenience.
Your choice of market directly affects how effectively you will be able to control your positions and manage your capital. Choose a market and trading style that fits your schedule and allows you to control your trades without unnecessary stress.
2. Finding a trading strategy
After selecting a market, you need to find a suitable trading strategy. This takes time: the first 9-18 months are best spent exploring different approaches to see which style of analysis and trading suits you. Don't just focus on choosing an entry point - a complete strategy includes rules for entry, stop loss, take profit, trade management and risk management.
Exploring multiple strategies will help you choose the one that best suits your preferences and way of thinking. It is the holistic approach to strategy that will avoid many mistakes and failures.
3. Stop constantly searching for new strategies
At some point, it is important to stop experimenting and focus on practicing one strategy. Even the most successful strategy does not guarantee you a constant income from day one. The market is full of losses and gains, and your job is to adapt your chosen strategy to your tools and stay disciplined.
You should not change your strategy after the first few unsuccessful trades. In most cases, the problem is not in the strategy, but in the trader's ability to execute it correctly. Realizing this will help you avoid the temptation to look for the "perfect" strategy and focus on your own skills.
4. Learn from mistakes
Regularly analyzing trades helps you identify weaknesses and improve your discipline. Often traders lose money because of violations of their own rules, not because of flaws in strategy. Regular review allows you to identify moments when you deviate from the plan and realize what you need to improve.
Transaction analysis can also show you how to optimize your strategy. For example, if you notice that your stop loss is triggered too often, it may be worth reconsidering its placement. These valuable insights can only be gained through regular analysis.
5. Backtesting - speed up the learning process
Backtesting (analyzing historical data) allows you to accelerate learning. During backtesting, a trader applies his rules on past data and evaluates how the strategy would have worked in the past. Backtesting helps to improve pattern recognition and build the skill of identifying profitable trades in real time.
The more time you spend backtesting, the better. Even 30-minute sessions analyzing historical data can help build your confidence and skills.
6. When to switch to live trading
Starting with a demo account is the best way to learn strategies without risk. But moving to real money trading requires confidence in your strategy and an understanding of the risks involved.
Some traders prefer to use the capital of funding companies that provide funds for trading. This is a great way to learn how to manage risk while adhering to strict limits. This approach can be good training because it imposes discipline and responsibility for each trade.
7. Expectations and risk management
Many beginners have unrealistic expectations that trading will allow them to make a quick buck. It is important to realize that high profits come with high risks, and excessive risks often lead to large losses. Start with proper risk management and stick to the principle of not risking more than 1% of your capital in a single trade. This will help you avoid large losses and maintain emotional stability.
If your trading account is small, using the services of funding companies can be a good alternative, as they usually have strict money management rules.
8. Build up your capital gradually
Trading is a game of patience. It takes time to develop skills, to wait for the right trading opportunities, and especially to build up trading capital. Gradual capital accumulation requires discipline and patience, as the market will not work in your favor instantly.
Initially, if you have a main job, this gives you an advantage: you don't feel pressured to create income from trading. You can quietly develop your trading account, gradually investing additional funds only if you have proven to yourself over several months that you can earn consistently.
Accept the fact that success in trading takes time. Even if the path takes 5 or more years, the end result will be worth all the effort. Fast growth and shortcuts usually do not lead to sustainable success, but discipline and proper money management will help you achieve your financial goals.