Think Like A Trader Blog

Friday, 26 February 2016

The Only Way To Get Over A Trading Plateau

Improving at trading is a difficult task. Once you learn the basics and have a good understanding, most people hit a plateau. This is usually as a break-even trader, or a trader losing small amounts. You take lots of good trades, but there are also mistakes that drag you down.

So how do I suggest people improve?

Well, I’m going off of the premise that you already have a good understanding of trading and also a trading plan that you are confident in. If that is the case, then the most effective way to improve is by trading less, and trading smaller.

Sounds like an oxymoron, right? I bet some of you are rolling your eyes. Heck, I bet a lot of you clicked off of the page after the last paragraph! Bon voyage to those traders.

For the rest of you, I’ll tell you why it works:

I can almost guarantee that when you're trading, you're thinking about the money. It’s ok to admit that (it’s what brought us all here in the first place!) but it is not ok to let that continue. It will wreak havoc on your trading results.

Trading needs to be about your trading plan and what the charts are telling you. That’s it, all wrapped up and placed in front of you. The money, when you are thinking about it, is at best a distraction, and at worst a wrecking ball that will swing through your account. You will over trade in an effort never to ‘miss a move’ and you will let yourself break your rules in an attempt to ‘make back losses’.

If you find yourself every doing either of these things, then you need to follow the two steps outlined above:

1)   Trade less
2)   Trade smaller

Trading less forces you to find the perfect trade. If you know you are only allowed one trade per day (and you stick to your rules) do you think you will be more or less likely to jump on trades that don’t fit your rules in case you miss out? It makes you very selective. If you’re going to have one trade and one trade only, then you want it to be a trade with the highest probability of winning – and that is a trade that aligns with your plan.
If you’re getting stressed when you have two or three losses in a row, abandoning your plan and desperately scrambling to make back the money, it is because you are risking too much. Trading is not a sprint; it is a marathon. Trying to make fast money will leave you fast broke. Reduce your risk. If you still find yourself entering the same stressed, angry mind set after losses… reduce it again. And again. And again.

You need to be able to see what is in front of you on the screen, not be thinking about what is in your account. That is the only way to improve as a trader.

I hope you’ve all had a great trading week!

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