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KEYS TO SUCCESS
TRADER KNOW THYSELF
The Road Ahead: What You Should Know Before You Even Begin
There are many factors to becoming a successful day trader. Becoming a successful trader is the result of acquiring and perfecting key attributes that include persistence, adaptability and a willingness to learn and improvise. I'm sure you've heard that trading is a 'journey' and that is true - just like any other path of education. As part of this process one will make countless errors along the way. A trader's ability to both learn from mistakes and recognize where he needs to improve his methodology is a critical part of the learning process. The path to success is as much a path to enlightenment to one’s own behavioral strengths and weaknesses and learning to adapt based on them.
The Journey Begins: What are the Attributes Needed to Become a Successful Day Trader?
Successful traders come in all shapes and forms. They may seem like a different breed of people, but they are normal people that have been through the rigorous learning curve and adapted their methodologies to work with current markets. They have also built an awareness of when things may not be going their way and have the assertiveness to take action to prevent small losses from turning into major losses. Most importantly, they are constant students of the markets and are rigorously recalibrating and adapting methods to conform with the shifting paradigms of current trading markets. Here are 10 things that successful day traders do differently:
Specialization: Becoming a Skilled Sniper
Experienced day traders' style of trading best suits scalping quick intra-day trades within seconds to minutes or identifying and holding trades for hours to key market targets. See our suggested methods of trading our MRZs™ here.
Successful day traders understand which markets, which times of day, and which methodologies best suit their risk personality and trading approach. Some traders find great success trading slower paced markets, while others prefer the volatility and momentum a market like the NASDAQ offers.
The key word here is: specialization. They specialize in a particular style of trading, have identified and perfected one or two key setups, know the type of market conditions they excel in, and, then, patiently wait for those conditions and then - strike! Part of becoming a great trader, is assembling these various components that suit you into a cohesive trading plan. It has been said, that there are many extremely wealthy traders who made their fortune by trading just one or two trade setups - and mastering it. Don't reinvent the wheel - duplicate it!
Preparation: Trading the Plan
The best traders are disciplined. They approach each trading day methodically. They have a plan and they trade that plan. Trading is a business. You cannot control the markets, but must control your routine and emotions. Traders that are consistent in their daily routine, are the same ones that are consistently profitable.
Routines such as: Placing your MRZs™ on all your charts each morning, reviewing longer term price action charts and the overnight price action, assessing market sentiment, reviewing your trade plan, trade setups and how you execute, checking your data feed, computer, internet, and any other technicals. Prepare as if you are going into battle or preparing for the 'big game'. Traders understand this is just like a job, and all jobs require preparation - especially trading. Build solid, consistent habits and you are one step closer to being a successful trader!
Capital Management: Proper Risk Control
Often, new traders, dismiss or underestimate the critical importance of proper risk management; instead, they focus on the targets and the 'result'. However, if your risk control is not under control, then it is only a matter of time before your inexperience and/or lack of discipline result in a loss (or losses) very difficult to recover from. Capital is the trader's lifeblood. Your ability to properly understand your risk parameters before and during the trade is a critical skill that needs to be mastered to be successful. By controlling your risk - and your emotions - then when you occur inevitable losses as part of the business of trading, you are able to quickly recover and be ready for your next trade setup, rather than be sitting in a state of shock from a big loss.
Day Trading
Risk Management
The best traders know that managing risk is just as important as catching a major move. Most know, that risk control is probably the single most important aspect of great traders!
Focus: Not Being in a Position IS a Position
Many traders feel the need to always be in a position. The best traders understand that there are periods of time when the odds are not in your favor - whether its the time of the day, excessive volatility - or a lack of volatility, price action is not conducive to your style of trading, etc. These are times when it is best to 'SOH' (Sit On Hands) and wait for your the market odds to return in your favor. This is where self-discipline and 'Trader Know Thyself' come into play. As discussed elsewhere on this website, just as a professional black jack player tracks the card count and patiently waits for the count to be in his favor, placing the minimum table bet during that time - UNTIL the count is in his favor, and then he/she bets big. This is what great traders do - they patiently wait for their best setups - for confirmation of their indicators, price action, and other tools to align - and they increase the number of contracts and press that trade. On lesser 'quality' setups that still warrant a trade, they trade less contracts. When the market is out of their favor, they sit on the sidelines and monitor....waiting....and then...striking! Always remember, there is an emotional toll to be paid on losing trades - that take away from your ability to focus on the 'next' trade. You have the ability to learn to manage that by taking only the best setups and exercising patience, and reducing the number of losing trades you take.
Resourcefulness: Great Traders Pivot and Adjust as Needed
Seasoned day traders have found their honey holes for information and data. They know where to go to validate news and which tools and indicators work best in what type of markets. For example, reverting to 15-minute trending charts in flat markets and searching specific resources for the latest insights into price action or rumors.
Scaling: The Power of Adjusting Position Size
The best day traders have learned about the power of scaling in every aspect of trading. They scale what works, and eliminate what doesn’t. Not just in actual trades, but by recognizing their own strengths and weaknesses as a trader, and playing to the strengths, and minimizing the weaknesses. In doing so, traders are able to consistently fine tune their strategies and how they employ - and manage them - as they gain more experience and confidence. This results in higher win rates, better MFE, lower MFE, and higher average winning trades. In the example below, we show 'reverse pyramiding' which is the correct method of averaging into a trade that will reduce your stop size and improve your average trade price favorably. We do utilize this to some extent, albeit a slightly different technique, that helps maximize the effectiveness of our MRZs™ which you will learn as a member. We also employ it in a similar fashion - on certain trades - at Top Gun Trend Trades.
Reverse Pyramiding (Scaling) Into a Position
12 MES Sold @ 3854
8 MES Sold @ 3852
4 MES Sold @ 3850
Focus
This plays off specialization, as successful traders don’t lose focus or get sidetracked away from the stocks, set-ups and types of trades they specialize in. This doesn’t mean they won’t try to expand their basket of trades, but they remain focused on what works and what may work even better. This focus enables them to be more efficient and not waste actions or capital.
While new traders are attracted to shiny objects (i.e. hot stocks, sectors, etc.), experienced traders focus on what they know.
Rules: Adherence and Pivoting
Professional, experienced day traders have their own rules that they abide by. Some rules may be adaptive to the market trading environment, as discussed above, like increasing maximum position size for a specific type of high probability set-up. On the other-hand, some rules are not to be violated, like ceasing trading for the day if a maximum drawdown of, say, 10% in the account is hit. These are hard and fast rules; no exceptions. These type rules are designed to protect our capital and protect us from ourselves and prevent us from making emotional (and, typically, poor decisions). The ability to make, apply and abide by the rules is a top quality of successful traders.
Can Be Adjusted If Mkt
Conditions Warrant
Iron Clad: Cannot Be Broken
Conditional Rules
Firm Rules
Adaptive: Survival of the Nimblest
Skilled day traders have reached levels where they are intuitive enough to adapt to various market trading conditions with relative calm and ease. They know through experience how to adapt to different situations and set-ups. For example, high volatility markets with exceptional price swings call for a more momentum-based methodology prioritizing smaller time frames like a 1-minute chart while low volatility trending markets require smoothing out the choppiness with higher time frame charts like 10 or 15 minutes. An experienced trader will recognize and understand that market structure and key market levels and MRZs™ are where price will seek to test and they will exploit that market tendency. Also, as discussed above, they know when to recognize the market environment is not good for trading any setups, and will patiently - and gladly - wait for the best opportunities to reveal themselves.
LOW VOLATILITY
HIGH VOLATILITY
The journey to becoming a successful trader is filled with highs and lows, as well as trials and tribulations. While it is different for every trader, what is common for all who partake this journey is the pain, frustration, and aggravation you will encounter along the way. Some will not make it beyond the period where much of the learning process in the journey is painful. It definitely helps to have a passion for trading - and to be able to find joy and achievement in your successes and milestones you set for yourself. During this time, the focus should be preserving your capital until you reach a level of competency. One major of benefit of trading is it is scalable: that means, if you can succeed when trading 2 micros, then you can succeed trading 2 mini contracts, and then, when ready, 5 and so forth - you only increase size as your account grows and your skill justifies it. The flipside is, that if you trade beyond your account size and/or skill level before you are ready, you will soon find yourself back at 'zero' - literally and figuratively. Focus on the keys: risk management, emotional management, great confirmed setups, and discipline. The rest will fall into place.
I created the Top Gun Trade Zones website and our partner trading website, Top Gun Trend Trading, to help give new, intermediate, and experienced traders an 'edge' in the market and expedite them on the path to their goal of being a successful, independent trader. In my own trading, I employ all the techniques discussed here along with the critical tools which are simply the best I have found or created during 25 years of professional trading. These are the very same tools I offer on this website (Top Gun Trade Zones/MRZs) and on Top Gun Trend Trading. Essentially, they are the best of the best available - proven in real-time trading, both institutionally and independently and available to help get you to your goal as soon as possible. This is why I am very protective of this proprietary information and how I disseminate it. They represent the culmination of what I have learned over a lengthy, 25 year trading career. Yes, you still have to do the work - but with the information, knowledge, and tools available to you on these two websites, you are on a trusted path that gives you the best possible opportunity to succeed in the shortest amount of time possible!
"Risk comes from not knowing what you're doing."
~ Warren Buffet
~ Warren Buffet