You know the saying, “The best time to plant a tree was 20 years ago. The second-best time is now.” That’s because it takes about 20 years for a seedling to grow into a fully mature and productive tree. In other words, it takes some time before you can reap the rewards of your efforts.
In trading, patience is also required to be successful long term. It’s not enough to have an idea that could make money; if you’re going to trade successfully over the long haul–say five or ten years–you’ll need something more than just a good idea: You’ll need Discipline and perseverance as well. And while many traders don’t get rich overnight, those who succeed do so because they have the patience to stick with their process and avoid costly mistakes over many years.
Secrets To Long Term Successful Trading
Here are some tips on improving your trading by developing a good trading plan and sticking to it.
1. Start Small
No matter what type of trader you are, whether a day trader or long-term investor, start small. Many new traders place too large of an initial trade that’s incommensurate with their experience and capital. It only leads to disaster as newly opened trades quickly turn against them. When starting, match your risk with your experience–that means if your capital is $10,000, use a round lot size of 100 for equities and 1 for futures contracts instead of 10,000 shares or ten soybean contracts.
2. Develop A Trading Plan
Don’t enter the markets without a trading plan outlining your strategy, objectives, and risk parameters; this will help you track your progress over time. One of the best ways to do so is through technical analysis–which many traders find easier than fundamental analysis because you can do it in all market environments (bull/bear). In contrast, fundamental analysis requires some knowledge of economic factors. A good starting point for developing a sound trading system or plan is writing out an “if-then” statement for each possible outcome; this includes both long and short positions along with target entry and stop-loss points.
3. Manage Your Positions
To employ any strategy requires you to manage your positions properly. That means when you’re in the money, you should take some off-limit or reduce your losses. If it’s still trending in your favor, then take partial profits at predetermined points to protect gains and lock in profits. “A bad plan with no contingencies is better than a good plan with no contingencies,” said the late Paul Tudor Jones II.
4. Don’t Over-trade
One of the best pieces of advice I ever received was from my mentor in 1992, who told me that 95% of trading success comes down to nothing more than keeping one’s head while all about are losing theirs (and according to Warren Buffett). So what does that mean? It means don’t over-trade, don’t trade for the sake of trading, and only enter the market if you have a good reason to do so.
5. Keep Good Records
Along with developing a sound plan, keep good records that are based on facts rather than opinions. To do this, use your brokerage’s Option Analyzer Tool, which provides calls/puts ratio data–you can also analyze open interest in futures contracts. The most important thing is not to “cry over spilt milk.” It would help if you learned from your mistakes so you won’t repeat them in the future.
6. Avoid Excessive Regret & Self-Blame
Many traders allow past losses to affect their current performance by engaging in self-blame when breaks occur within the price action. It produces feelings of excessive regret, inhibits positive response to corrective opportunities, and can impair judgment. Remember that trading is a business where fortunes are made by catching the big moves while minimizing the losses from those breaks that you cannot turn in your favor.
7. Control Your Emotions
To succeed as a trader, you need to control your emotions, including avoiding becoming too elated when prices go your way or feeling overwhelmed during sideways periods. It may cause you to make incorrect decisions as to what course of action to take. As long as you have done your homework and followed through, it’s only normal that some trades will work out for profits and others won’t; try not to let market noise upset you–it’s part of the business.
8. Don’t Seek Freedom, Seek Discipline
In the end, all traders need to have a goal that is greater than merely making money–it must be about attaining freedom from those things that prevent them from becoming successful and include your time, relationships, and personal health. Trading provides a means of acquiring all three, so you should not seek easy riches, but Discipline and control instead because these things will help you achieve success over time rather than never knowing if or when the next trade may happen.
9. Keep Learning
It is crucial as no one possesses all the answers, including brokers and market makers; daily interaction with markets keeps you sharp and learning new skills such as programming trading systems for use on MT4 or off-line, which helps you increase the number of possibilities for exploring trading opportunities. It is not just about learning new techniques but also knowing how to use them in combination with one another–a potent tool indeed.
10. Use Technology To Your Advantage
One of the easiest ways to learn how to trade is by using trading software which includes both MT4/5 and FIX-based platforms where you can choose from a range of different strategies, including price action, pivot points, Fibonacci, Gann, and many more.
11. Master The Basics
For me, this includes things like money management and staying on top of market news, as it’s these that will enable you to grasp what may be happening within the markets at any time within the present environment. As the saying goes, “It’s not what you know but knowing where to find it.”
12. Stay Motivated
It’s vital to continue putting in the work every day, which helps keep your Discipline on track. A lack of motivation can be attributed to a lack of goals or unclear expectations, so make sure you are well prepared before entering the markets.
13. Develop A Winning Mindset
Keep your mind focused on things that encourage positive thoughts, such as how much money you could make if everything works out for the best rather than wasting time thinking about losses. Remember that trading is all about probabilities–some days will go great while others may not, depending upon circumstances; always remain flexible and alert because no one can predict what the market will do next, not even those who claim they can do so.
14. You Can Get There From Here
When it comes to long-term success as a trader, there are no “best” days or “worst” days–every day is what you make of it, which means focusing on the process instead of the results. To keep your motivation going, you must look at each trade as a learning experience where knowledge gained allows for greater profits over time, which will enable you to purchase more contracts with money saved from past successes.
15. Stay In The Present Moment
It goes hand in hand with staying motivated because your thoughts create your reality; if you think about losses, then there’s a good chance that’s exactly what will happen, but if you see them as learning experiences, then the opposite will follow. Emotions are very powerful motivators that can cause you to both wins or lose money, so never let your mind drift because this means you’re either thinking about things other than trading (which creates an opportunity for mistakes) or that you’ve allowed negative thoughts to fill your head which affects motivation.
16. Trade Within The Trend
If the price is up, look for buy opportunities. If it’s down, search for shorting possibilities; even within range-bound markets, there are buying and selling opportunities, just not as many because they last longer.
17. Use Stops To Protect Your Profits And Cut Your Losses Short
Always know what your entry point is–this is your stop loss point; if price violates, then you should be out, simple as that. As for-profit targets, these are purely up to you but remember that they’re less likely to be hit if the price moves too quickly, which is why using risk/reward ratios plays an important role in the equation.
18. Know When To Hold Them And Know When To Fold Them
Never average losses because this only creates more problems; instead of looking at each trade as a learning experience where you can make money, it becomes one where losses accumulate and deplete all your capital. With this mindset, it’s almost impossible to achieve long-term success, so always cut them short.
19. Don’t Chase Your Losses
Just because the price may have violated a key support or resistance level doesn’t mean that the decline will last, so it’s essential not to be quick on the trigger when exiting trades. You can use these levels as profit targets later on–if price respects the level again, then there’s a good chance that it will continue dropping lower, which provides an opportunity to buy low if you believe in a bounce from this area.
20. Be Patient
Whenever possible, wait for clear signals before entering a trade because this means you’ll avoid many false ones and also helps keep emotions at bay while waiting for price action to develop into something more profitable.
21. Keep Your Losses And Wins As Close To Equal As Possible
It means cutting small losses quickly and letting more prominent winners run so that you can get on with your day instead of worrying about every tick. Sure, there will be times when this is difficult to do but realize that they even out over time which provides consistency.
The Secrets To Long Term Successful Trading As a trader in the market, you’re always going to encounter losses, and that’s okay. After all, no one can predict what the market will do next–not even those who claim they can. How you react when trading goes south is important because this determines whether your account balances will increase or decrease over time.