Is Your Goal to Beat Wall Street & Become a Millionaire Trader?
Do you want to be a successful Wall Street trader? Making money in the markets while others are busy working for ‘The Man’? Or maybe you just want to dabble for a little extra side income? Take away a pesky truck payment, gas expense, phone bill, or whatever it may be?
No matter what reasons you have for becoming a trader, which can vary greatly from person to person, there are a few core essentials that can help anyone stay consistent and achieve long-term success:
1) Have A Defined Strategy:
Every successful trader has a defined strategy and uses it to execute their gameplan every single day, and it all starts with deciding what type of trader you are. Once you’ve nailed down the approach that best suits you, you have the necessary foundation of a disciplined trader. Imagine constructing a skyscraper – it’d be nearly impossible to complete without a blueprint. Similar actions need to be taken when it comes to trading.
One of the easiest, yet underutilized methods of being a disciplined trader is to write down your plan for each trade. Seems simple enough, right? Problem is not many traders take this initiative, or they miss out on an essential aspect of it. Keep in mind that your trade plan doesn’t have to fill up much more than a post-it note, but it should be as detailed as possible when it comes to buy and sell prices.
This is where some costly errors can come into play. Most amateurs jump right into trades with the thought of “I’ll buy at this price and sell when the price goes up”. There are 2 major issues with this: First, it’s not detailed enough. Selling “when the price goes up” is much too vague. Second, there’s no plan for if the price goes down. This is how undisciplined traders let trades get away from them and blow up their accounts. With a simple plan, a disastrous consequence like this can be easily avoided.
- Decide what type of trader you are in the early stages
- Plan your trade and trade your plan (write it down!)
- When you are entering a trade, know what price you will sell at if the stock goes up, as well as if the stock goes down
- Failing to plan means you’re planning to fail
2) Cut Losses Quickly:
Cutting losses quickly goes hand in hand with having a plan and can keep you in the game for the long haul. No trader hits winners every single time – that’s just the way it goes in the stock market. You’ll make some trades that can wipe out your portfolio if you’re not disciplined.
Most experts I’ve seen have about a 70% success rate per trade, which means 3 out of 10 trades don’t go their way. By staying disciplined, you can protect yourself. But being careless and lacking self-control can diminish your portfolio in no time. There’s ample opportunity to capture gains in the market and consistency is what pays in the long-run. Have a defined strategy, plan your trades, cut losses quickly, and above all else, be disciplined.
3) Pay Themselves Consistently:
On the other end of the spectrum, when trades are, in fact, moving in your favor, you need to be disciplined as well. Don’t be the trader that routinely lets 20% winners turn into losers. Pay yourself those 5-10%+ wins when you have the chance and move on to the next one. It may not seem like much, but if you are implementing an active trading approach characterized by 2-5 trades per week, those modest gains can really add up over the course of a year. And assuming you’re keeping your losses small (about 3-5%), you could be making a nice profit for yourself. The bottom line is: you can’t make money if you don’t take profits.
Don’t be greedy and “hold for the top”. The problem with this is that you’ll never guess the top exactly, or the bottom either for that matter. Of course that’s the goal of every trader, to maximize profit, but you’re not a fortune teller. What you can do is play the odds and put yourself in ideal situations, and as long as there’s enough “meat” in between the top and bottom, you can still make your gains. You can’t get caught up in catching the top and bottom of a stock’s price action perfectly because it’s simply impossible.
The Wrap-Up: Fundamental Requirements For Every Successful Trader
If there’s anything you should take away from this it’s that disciplined traders are the ones that last on Wall Street. By having a defined strategy, cutting losses quickly, and paying yourself, you give yourself a much higher chance of success.
Implementing a disciplined approach isn’t all that difficult either. By simply deciding what type of trader you are and writing down your plan for each trade, that should take care of the rest. There’s no “when should I cut my losses?”, “when should I sell my shares for profit?”, or “what should I do next?” after you’ve already entered the trade because these details are specifically outlined in the trade plan.
Don’t let a lack of self- control and inconsistent practices inhibit your success as a trader. If you define your strategy, cut losses quickly, and pay yourself, then you have the potential to beat the street. Be disciplined and trade green!
Written by Matt Thomas