If You Want to Succeed in Trading for Living & Trend Folloiwng you Need A Business Plan

I had a nice conversation with a young man in Chicago who purchased the home study course. We spoke about his trading and his one comment really stuck me. In order to succeed :” You need a business plan”. I have said this for ever and I was very happy to hear an aspiring trading internalize the point that trading is a business…that trend following is easy to learn…however trend following involves developing the proper trading psychology and if one really wants to succeed they need to spend the time and make a business plan…or better said a trading plan.

Learning to trend following itself is rather easy. The turtle traders learned how to trade in under 2 weeks, however they all had different levels of success as well as failures. The difference, in one short word, psychology. How do you feel after 7 or 8 trades in a row that do not work…and you lose money? Too many quit and look for the next strategy. This is a formula for failure. Another point I have learned over the years is look at percentages…not money. You must accept the risks when putting on the trade. You must delineate or try to delineate the risk when putting on the trade. I put on average 1% of my account size on every trade. In some of my programs I only risk .5% or .75% of my account size on a trade. I know that many of my trades will not work and I do not feel any discomfort when the trade does not work and I lose $2000 to $3000 on a trade. I know that is all a numbers game and probabilistic game. I know I have to keep my losses small…or better said..try to keep them small. I can put stops in the market but there can be gaps or limit moves which increase my losses. This is reality. There is no way to prevent losses. They are as natural as breathing. If you want to succeed in trend following, forget about looking for magical indicators or systems. Develop a robust trading plan based on your personality. Devote much time to risk management. Entries and exits are much less important. Think in terms of risk per trade…risk per sector…risk for the whole portfolio….

Yes you can succeed…have patience with yourself and undertrade. This will keep you in the game. It is not easy to trend follow nor is it for everyone. There are always challenges..losses..and draw downs…however there are new equity peaks once you develop your trading plan.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts, commodity options or forex can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results. You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

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