Being able to follow a plan. When I first started trading it was all about the profit, yet sometimes it is better not to trade, and during those times there is no profit. So for me it really comes down to following my plan. If I follow my plan and lose, that is fine - the trade was still a success. On the other hand, even if I make a profit, but I didn’t follow my trading plan to do it, that is a failure. Success is measured by my ability to be disciplined. Without discipline and following a plan, results are random and unsustainable long term.
Discipline. With discipline many strategies can be tested out, and risk can be controlled, to see what really works and what doesn’t. Without discipline, traders bounce back and forth between strategies, never finding anything that seems to work. No system wins all the time, so being able to stay disciplined and stick to something even during a rough patch is what fosters success. Once some success has been achieved I feel it is important not to try to optimize performance, but rather stick with what works and not tamper with it.
Create a plan, follow it, and control risk. If a trader takes the time to really think through a strategy and ponder all the contingencies for entering, stop losses, profit targets, trailing stops, risk management and whether they are physically, financially and mentally able to even implement the strategy they have devised, they have a much greater chance at success. Once the plan is formalized it should be written down. That document becomes the rule book for trading. That plan is followed - win or lose - until enough trades have been made to determine if the plan is a keeper or not.
The plan should control risk and not allow more than 1% to be risked on a single trade. By doing so, a lot of losing trades can occur, yet most of the account’s capital will remain intact.
When I started traded, or at least very early on my career, I learned about discipline, controlling risk and following a plan. Profits came quickly and easily at first because I stuck to these principles. Yet, with the taste of success come confidence and eventually arrogance and the need for more. I tried to make my strategies better, even though they were already producing great returns. Soon enough, the strategies deviated so much from the original that they failed to work at all. It took me quite a while to get back to basics and to avoid the temptation of always trying to improve a strategy that is already working.
So to those starting out, I would say if you find something that makes a profit, don’t continually try to make it better. Keep things simple and don’t change the things that made you profitable in the first place.
See Cory Mitchell’s latest market comments, analysis and articles here: http://vantagepointtrading.com/daily-blog
Forex Trading for Beginners
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