This article in The Trader’s Pendulum Series discusses the Trader’s Process, which includes the broad areas requiring a bit of work. In the last article we discussed The Trader’s Scorecard, a short assessment to help you to understand how close you are from becoming an Entrepreneurial Trader, and whether your current habits and mentality support the success of your trading business. Hopefully you have completed the Scorecard (www.fxtradersedge.com/scorecard) and are now ready to get down to business.
The Process to Get Organized in Your Trading
- The Business Model
A trader’s business model might be this: get to know the behavior of a currency pair, stock or commodity and monitor it for three hours each day; take trades when you believe there is a high probability of making a profit; and gradually increase the trade size as the account balance grows to take advantage of the compounding effect.
The model will depend on the individual trader’s circumstances, which are a combination of the time available for trading, the size of the trading account, and the trading skills that have been acquired.
- The Business Plan
All successful businesses have a business plan, and so should your trading business. A trader’s business plan outlines the stages that a trader must work through to arrive at success. Each of these stages typically consists of a series of actionable steps, as well as specific and measurable goals. These steps have to be done before the “live” trading takes place.
- The Physical Environment for Trading
When setting up your physical environment (i.e. your workspace, trading desk, and the necessary furniture), consider the personal comfort, noise levels, distractions and interruptions. Make sure the technology is up to speed which includes a fast internet connection, sufficient screen space, and a computer with sufficient capacity. Also review your charting software, trading platform and trading tools to make sure they do everything you require.
- The Broker
Due diligence is required to research the broker you choose to trade through. Make sure you research how capitalized they are, so that your money is secure.
- The Trading System and Strategies
It is impossible to be consistent unless you have a trading system and know it well. Your system may consist of a number of different strategies that apply to different market conditions.
- The Money Management Strategy
The money management strategy is one of the most important parts in your business plan. Some of the items it covers includes the maximum percent risk you are prepared to accept across all trades, the maximum percent risk you are prepared to accept on a single trade, the rules for moving the stop to breakeven, and for advanced traders, the rules for breaking the rules!
- The Psychological Preparedness for Trading
You must follow the rules of your system and each strategy therein. This involves patience and forming strong habits, and you must absolutely avoid making decisions based on emotion. Trading is a waiting game. Your intention is to ambush the market when the conditions are right. Traders beware, you could earn large sums of money. Gamblers beware, the market will relieve you of your cash in an instant!
Habits #4 – #6 of the Top 10 Habits
Habit #4 Commit to Your Education with a Trading Coach
Habit #5 Understand and Exploit Your Unique Trading Personality
Habit #6 Follow a System
If you’re interested in working through these habits, the book is a detailed blueprint for the 10 Habits for you to follow and make your own.
If you agree that you want to become a trader or investor who stays out of the Technical Trader’s Trap, then you will need to become an entrepreneurial trader.
I created the FX Trader’s EDGE Coaching Program modelled after the “10 Habits of Successful Traders”, which is the title of my newly published book by Wiley.
Excerpted with permission of the publisher John Wiley & Sons, Inc. from The Trader’s Pendulum: The 10 Habits of Highly Successful Traders. Copyright (c) 2015 by Jody Samuels. This book and ebook is available at all bookstores, online booksellers, and from the Wiley web site at www.wiley.com.