The Six Stages to Trading Success: Stage Six
Once you understand that discretionary trading is an art, and you've completed a trading plan based on sound analysis, and then demo or micro traded that plan profitably through six months of live trading, with the full understanding that it is always price action which supplies a trade signal and not you, you are a trader. Most individuals don't make it this far for two reasons. They are not accustomed to following orders, i.e.: following the trading plan they have chosen. And they cannot make the mental adjustment to risking their money knowing that the outcome is uncertain on every trade. The way a professional handles both of these hurtles is very simple: qualify the method you've chosen by trading it in a demo or micro account in blocks of ten trades. Understand ahead of time that a trade only counts when you have followed your trading plan to the letter. After entering and managing 10 trades in a row you can review the plan to see if any adjustments are necessary. Then complete 10 more trades, pause and evaluate, then 10 more trades etc. You may find for example that trading between the close of the U.S. session thru the opening of the Asian session produces false signals. While this is not the forum to teach specific trading tactics there are a couple of observations we can make to help you to be able to quickly tell if a trading method is viable for not. Number one it needs to function in both trending and counter-trending environments. A method that works in one and not the other will likely never produce the consistency you need to risk your hard earned money in today's financial and commodity markets. Number two it must address trading multiple contracts, and money management. To operate in all market environments traders need the ability to take a profit on a portion of their position should market movement - volatility - contract, and let the balance run should price movement expand. The only way to execute this simple tactic which allows you to simultaneously protect a profit while allowing a profit to run is to trade multiple contracts. You also need to have a simple strategy for limiting your loss on every trade before you enter the trade, i.e.: entering a stop loss order. Once you know and accept your potential loss by placing the stop order, you are able to focus on the success of the trade, which allows you to achieve what 90% of traders consistently fail to do, which is "let a profit run". You are not going to achieve large winners consistently without planning for them ahead of time. In order to believe your trading plan will be successful you have to mentally accept and then embrace the risk of loss ahead of time.
Individuals who have achieved the trader status also think differently than 90% of the population, and it shows in their speech. You rarely hear a trader referring to "my method" because she knows the dangers of "ownership". The method you use is simply "the method". You also won't hear a professional trader express their opinion often, because traders know the danger of having an opinion to start, let alone expressing one. "Lose your opinion, not your money" is gospel on trading floors around the world. For professional traders discipline and patience go without saying. They know that "the wish must never father the thought". They also know "to keep it simple" because, in the words of Benoit Mandelbrot, the father of fractal geometry: "great theories are often humbled by mere facts". The professional trader's plan of action from her philosophy to her method, to the trigger, to the management of the trade fits on one piece of paper, and once established, rarely, if ever changes. And foremost the trader understands that it is not money they strive for, but peace of mind.
To see Jay Norris highlight trade set-ups and signals in live markets for free on the London / U.S. overlap go to Live Market Analysis
Trading involves substantial risk of loss and is not suitable for all investors!
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.