Success in trading comes from using a systematic methodology which you then apply to the markets in a consistent, systematic and disciplined way. If you trade in an emotional way by guesswork you will lose your money.
The money in trading flows from the impatient and disorganised to the patient and organised. So it is critically important to exercise patience not only in waiting for the right trades but also much more importantly in staying with the trades that are winning. We all suffer from the tendency to grab at small profits and often try to avoid small losses by letting them mount into big losses and finally into catastrophic losses.
It follows that you should only trade if you’re adequately financed so that the market action not your financial condition dictates your trading decisions. The weak hands in trading are always shaken from the tree before the big moves before they can participate in the big moves. The markets will decide whether and if they give you any profits and they do not base that decision on how much you need those profits. Indeed there is much truth in that old saying that a bank will only lend you money if you can first prove that you do not need it !
In trading the well-financed traders tend to become wealthier whilst the scared money that is overtrading tends to get wiped out.
Overtrading is based on the amount of risk you assume compared to the amount of capital you have. It is important therefore to understand that you can be a millionaire and still be guilty of overtrading. Conversely you can have just a few hundred dollars in your account and not be overtrading. You do not have to have a lot of money to make money in trading what you do need to do is to use it correctly and not take any gambles.
The old saying in trading “never trade with the rent money” is very true – scared money rarely holds long enough to reap the benefits of the big moves. Scared money almost invariably, when under pressure, makes bad individual trading decisions, loses trading discipline and does not follow the original plan or pursue the original objectives. Scared money disappears.
On top of the above there are also a few hidden secrets to trading success. One of the most important ones is position sizing. Using the correct position sizing algorithms can absolutely transform your account balance by orders of magnitude compared to using more conventional methods.
Strangely this is not at all well covered in general trading resources or books or on YouTube etc. It is generally relegated to pages of complex mathematical formula that only degree level mathematicians could decipher. In both of my training courses I cover these matters in a much more understandable way and demonstrate the almost unbelievable differences that using these strategies can make to your account balance. Many people who have attended my training courses has said that this small piece of information alone is worth more than the entire course fee. They were right as well it really is !