The Secret to Trading Success

The vast majority of retail investors believe the secret to their success lies in finding the very best edge, the technical system that is going to see them be correct the vast majority of the time. Finding the best edge surely must be the ticket to making big money.

The secret to your success will not lie in the system that you use. The average novice retail investor given the very best trading strategy that wins 80% of the time would still find a way to lose money consistently.

“You have to be kidding,” I can hear you say. How can someone trading with a system that has an 80% strike rate still lose money?

Trading success is not defined by the system that you use nor the market you decide to trade. Your trading success will be defined by the discipline and patience you apply and the consistency in being able to replicate the edge you have over a series of trades. And the great news is you have 100% control over being able to do that. You will have no control with respect to controlling price movement, the buying behaviour of other traders will determine that, however you will have control over the most important parts of the trading puzzle.

Fear and greed cause traders to become emotional and it is when you are influenced by emotion that you can find yourself acting in an irrational manner. This irrational behaviour can self-sabotages a very profitable trading system because the trader is thinking win win, instead of execute, execute.

The reason why traders get emotional is because they lack the ability to influence price movement and each trade on its own will have a random outcome even with a system that may be right 70% of the time. Retail traders place a high degree of certainty on each trade they enter and when the trade moves against them or in their favour they do exactly what they shouldn’t do, fiddle.

The secret to trading success lies in consistency. Consistency in being able to execute the edge with proper risk and reward management again and again and again without deviating. That can be challenging for many new retail traders particularly when the edge is wrong two or three times in a row. The next trade you are desperate for a winner and it is this next trade that you often refuse to take for fear of being wrong again. By refusing to take the next trade you are likely self-sabotaging a winning trading system that has the probability of making you great money over a series of trades.

Success is not in the system, there are hundreds of trading edges that work and make great money over a series of trades. The key is to learn a system and trade a market that suits your personality type and lifestyle that enables you to be consistent.  Apply a risk vs reward ratio of 1:2 or better on each trade and aim to look at your results over a series of trades and not get hung up on one trade.

The secret to trading success is consistency.