Successful trading is not about earning more, but it's about being consistent and sticking to the plan. There are some laws of successful trading that all successful traders have shown and that new traders can follow as well to get into the top 1% of traders.
What does successful trading mean?
For a normal person, success might be on the lines of financial success. They might associate success only with earning more money or becoming richer.
Every single one of us has been in that spot at one point in life, and it is nothing to be ashamed of, but it is also nothing to be very proud of.
For traders essentially, they cannot substitute success for financial success. Traders that do so will have a hard time finding fulfillment in this business.
It might sound philosophical that money isn’t everything and that you shouldn’t put money on the highest pedestal. But out of my experience in this business of trading, traders would be way better off if they didn’t.
I was in the same spot in my early days, I would measure success by the money I earned and the number of pips I managed to pocket from trades. I was only concerned with the monetary gains and I allowed it to take the better of me.
But as I gained experience and went through different phases in my trading journey, I realized that my perspective towards trading was not healthy.
Going through a rough patch, I began emulating some of the greatest traders that have ever lived and I read about them.
Traders like Jesse Livermore, Ray Dalio, and Paul Tudor Jones, etc. have lived inspirational lives.
Some of these traders were not born in rich families but they turned their lives around through trading, some of them didn’t even start out as traders but with due time, they not only started trading but also become the so-called legendary traders.
I have already mentioned that 90% of traders fail and only 10% of them manage to sustain and become successful in this business.
These legendary traders have had their share of ups and downs but they were surely part of the top 10% of traders that made it big. So what is it that they did right while the others didn’t?
As I began reading and knowing about these traders I came across various strategies that they used, different trade plans, and different characteristics.
But I did come across something that was uniform. These traders did have something in common that set them apart from the other ones.
I implemented this in my trading and could literally see the difference it made. It changed my definition of success in trading and I ended up attaining success in all aspects of trading.
Through this blog post, I want to share these traits of successful traders with you and help you elevate your trading journey.
Laws of successful trading
1. Money is not the main goal
Trading is simple, as traders we look to buy and sell financial assets and hope to make a profit and for this purpose, we apply all types of analysis.
But is that what trading is all about? Is trading just about the monetary aspect? No.
Some of the best traders that have traded in the financial markets have themselves said that trading was not just about the money for them.
Traders are required to have different mentalities and sets of skills. Some traders are born with these while others have to inculcate it as they move ahead in their trading journey.
If you are someone that gives more importance to money then you will just be focusing on the wrong things.
You will associate monetary gains with success in trading, but this is not what successful trading looks like.
Money will be earned, but if your priorities are not right then the money earned will be for the short term and you will fail in the long term.
A beginner trader that focused on the money more in the beginning will start focusing on the process more as he gains experience.
You will realize that money is a by-product of your actions in the markets and the process you follow will dictate your success in this business.
Trading literally transforms the traders. It completely changes the traders.
In order to survive in this business, traders have to embrace this change and do whatever it takes to keep going.
Once you get adept with what trading requires out of you, it automatically changes your priorities. It changes your perspective towards this business.
Hence, it is important to give more attention to the process than to money.
Set a goal to stick to your plan every time and to improve your actions and you will see the changes it brings about.
Since trading is a serious business that must be looked upon with a longer-term horizon, traders have to act accordingly, and shifting the focus away from the money earned is the right way to go forward and also to sustain in this business.
2. Risk management is king
You will never come across a trader that will say that he made a killing in the market by risking everything all at once, but every successful trader will always give credit to risk management for their success in the market.
I am very strict when it comes to risk and its management in trading. The outcome cannot be controlled by us but we can surely control our exposure and how much we put at risk.
Let's consider two traders, Trader A and Trader B. Trader A never risk more than 2% on any given trade whereas Trader B alters his risk based on gut feeling.
Which trader do you think will blow their account? Trader B.
Which trader is going to consistently grow the account and avoid blowing it by avoiding bad risk management? Trader A.
You might have a strategy with an impressive edge that allows you to have an asymmetric risk to reward ratio, but it will all be futile if you do not manage risk properly.
One thing is inevitable in trading and that is losses. You will lose a trade every now and then and might even have a losing streak for some time.
If risk management isn’t followed then the losses might eat up your capital and you will be left without any capital to trade. Risk management is all about risking enough to allow you to sustain and survive in the market.
Risking frivolously might earn you some money in the short term. It will all be because of luck. But in the long run, it will lead to you being sidelined due to insufficient capital.
3. Emotional and psychological impacts should be minimum
Some traders might say that risk is their enemy but in reality, a trader’s emotions are his main enemy.
Now, the risk is something that is inevitable, if you want to get a return or a reward then you will have to put on some risk.
But emotions are something that will mess up with your plan and make you divert away from what you planned for.
Emotions come in different forms. Traders allow their emotions to take over and they exit their position early if they see the price moving against them.
Some traders may act impulsively and enter into trades without any plan and just because it looked good. Emotions may also take the better of the trader and it leads to them altering their stop loss and take profit levels.
These are just some ways by which traders give in to their emotions. This is the reason why I press a lot on the topic of mindset and trade psychology.
Even the best of traders have succumbed to their emotions and it has led them to losses. But what’s important is that traders ensure that it does not happen very often.
Trade psychology could easily be one of the most important aspects of trading, but it is still one of the most neglected aspects.
4. Uncertainty is the only certainty in the market
I am sure that you will have heard of rules like more the touches on a support or resistance area makes it stronger, or a support or resistance area is only when there is a minimum of 3 price touches, etc.
Let me tell you one thing clear and simple, these rules might work sometimes but will not work all the time.
There will be times where you miss out on trades that could have given you a massive profit only if you didn’t stick with such rules.
I have been in this business for quite some time now and I have realized one thing out of my years of experience, uncertainty is the only certainty in the market.
Don’t try to create rules for the market. Don’t expect the market to work according to your rules all the time. You are not bigger than the market and neither am I.
Our job as traders is to create rules for entries and exits and it should be based on some form of analysis.
The more you try to achieve certainty in the market the more you will miss out.
You have to understand what the market is doing, you have to be open to all kinds of possibilities, and you need to have a plan to deal with it all.
If the market behaves one way, you have a plan for it. If it behaves in another way, you have a plan for it too. And if it behaves in another way altogether then you should have a plan for that too.
Trust me, if you manage to inculcate this in your trading activities then you will not fail.
5. Perfection is a myth
Trading is a simple business where traders devise a trade plan and they look to execute it in the market, all while managing risk properly.
Each system or strategy has some probabilities or odds of playing out. These odds are to be calculated over a longer span of time rather than a short span.
These odds are not going to be positive and in the trader’s favor at all times. The system will win from time to time and will also lose. Hence, no system or strategy is perfect or bullet-proof.
Another aspect where perfection is a myth is about the actions of a trader.
Traders are not going to act with perfection in the markets, mistakes will be committed or things will not happen as intended due to several reasons.
There are traders that strive for perfection in everything they do. Every action that they take is a calculated one.
Things are going to go wrong every now and then and it is important that traders do not ponder over it and get distracted. Traders have to embrace losses, mistakes as well as bad luck in this business of trading.
Every day isn’t going to be a bright sunny day. There are going to be bad days where whatever you do, you will not get the results you expected.
Perfection is a myth. Things will not always play out as per our expectations all the time.
The sooner this fact is accepted the easier it will be to deal with the same.
Are you going to be among the top 10%?
I want you to read this blog post multiple times and properly understand all that I have talked about.
As I said, I have experienced all of this personally and I have literally turned around my trading journey.
Let me know if you found this blog post insightful and whether it helped you improve.
Do share this blog post with every trader you know and let them also unlock the next level in their trading journey.
Feel free to ask questions or queries through the comments section and I will get back to all of it.