First let’s define what a consistently profitable trader is…
A consistently profitable trader makes money consistently. That’s about as broad and narrow as I will make it. Notice I didn’t say “makes money on every trade”
I leave it broad for swing traders, day traders and long term position traders
Consistently profitable could mean you have a 20-30% win rate, but you happen to make big money on the winners and cut your losers short
Or you have a high win rate, 60-75% and you only make a little bit more than you lose, but you end up profitable
A consistently profitable trader has a really good idea how much money they will harvest from trading each day month & year
A struggling trader doesn’t know if they are going to be profitable on the next 10 trades
A struggling trader doesn’t know how to size their positions
A struggling trader doesn’t know if they are having a normal drawdown or if something is broken
A struggling trader lives with that pit of despair in their gut
A struggling trader sees a big market move and instantly goes to Twitter to find out “what happened”
A struggling trader is always waiting for a presidential Tweet to save the day
Best summary of a struggling trader, they are exclusively focused on the why and when to enter but not on any other part of the business
Now that I’ve shown a few examples of consistently profitable traders and struggling traders you should be able to see yourself in there
The first step is to focus on 1 single setup on 1 asset on 1 time frame and get really good at identifying it
Then document all the different characteristics about the setup
You can’t get good at trading if you don’t have 1 single setup that is your moneymaker, the foundation of it all
Next do not add any more complexity, focus on that single setup
Look for how long it bounces around after you enter, before heading into a winning trade
Look for how long it bounces around after you enter, before heading into a losing trade
Notice how far it can go in your direction
Notice how far it can go against you
Keep track of all the nuances you recognize
See it on 5m charts, hourly charts, daily charts
See it on different assets
See it in your sleep!
There is no reason to move on from here until you have 1 good setup
Then you need to backtest this setup, yeah this is the actual hard part of doing your own due diligence and work
This is what most people skip, they find a good setup, they look at it over and over and they think they can just throw real money at it and be done with this hard part of not printing money everyday
Afterall, everyone on Twitter seems to be making piles of cash everyday, it’s easy
It will take >1500 MANUALLY backtested trades on that single setup for you to be on your way to becoming a good trader
You can skip this step if you like, hire a dev or write the code yourself to bypass this step and I can guarantee you won’t succeed as a trader
This is the hard work everyone talks about
This is what most people don’t do
If 99% of traders fail, and everyone is talking about the same things in the markets, why wouldn’t you try something different.
If you do the work, and you manually backtest over 1500 trades of that single setup, you will be light years ahead of everyone else
The next step is to forward test, or paper trade the new setup, in live market conditions, on your trading platform
That step from backtest to forward testing reveals how important execution skills are
Mistakes are expensive
Slippage is expensive
Commissions are expensive
News, Market Conditions have an effect on your trading
Being hungry, tired, distracted, bored all has an effect
Paper trading to the point that you make no more than 1 mistake in 20 trades is the goal
Not entering a trade that you should take
Not taking profits where you should
Not stopping out when you should
Buying 10 contracts and not 1contract
Going long when you meant to go short
Using a limit order vs a stop order
Entering a trade that isn’t the 1 setup
Doing anything based on feel, not what you’ve tested
Trading when you are distracted
Not following your routine to get into an ideal state
A losing trade (as long as it was your 1 setup)
Missing a trade because you were in a bad mental state or distracted
If you can make $1 you can make 10, 100, 1,000 and 1,000,000
But it takes a while to get there
Backtesting is literally rewiring your mind to see the market and your 1 setup
The more reps you get in with it, the more you will see it and avoid things that don’t matter
Once you have a single setup that works over time and has been backtested to have posiitive expectancy and you’ve traded to confirm you CAN do it
The next step is a business plan
With all the work you’ve done with the manual backtests you should be able to predict your business
What are you financial and life objectives?
How much will you need to have trade with to achieve this?
Get that amount of money either by building it up, borrow, partner, join a prop firm
Follow the plan
Monitor your progress
Adjust and improve as needed along the way
Everything you need to bring your trading to the next level.
If you are interested in this stuff, Have a look at what we have to offer.
And think about joining us in the Lab, we work on these projects every day together
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