Kiss Your Money Goodbye!
Retail traders are often labeled as dumb money by those who hold positions in the financial industry. Some may dismiss this term, but their portfolios often end up at the same place as all the others who thought they could outsmart the market… ZERO.
But why do retail traders struggle to make money? Is it the quality of information they receive? Perhaps, but even with access to tools like a Bloomberg terminal, the information can be overwhelming and may only yield a modest return on their portfolio. So, is it the strategy? As seen by the backtests on this platform and in the videos provided, there are many strategies that can help retail traders make money. The answer lies in the way they think and approach trading every single day.
Imagine a strategy that was 99% profitable (meaning you make money on 99% of the trades that fit the framework of the system), but if you fail to manage the risk on those 1% of trades that this imaginary system would generate, then your portfolio is left at zero.
Anybody can enter a trade and make money, in fact, most new traders in 2020 did just that. So why don’t we see the same level of excitement in trading that was present 3 years ago? Traders failed to realize what trading is actually about.
When entering a trade, the only thing that should be thought of is the risk, not how much money can be made, not what you could buy with the gains IF the trade works, solely focus on the risk.
It is easier said than done, but the problem of managing risk effectively, once solved, can easily catapult a portfolio to an income-generating machine. However, there is another problem that plagues retail traders every second of every day. It’s not stop loss hunting from some big bad market maker, it’s not “manipulation”, it’s the way the trader thinks.
I say this all the time, but in order to have different results in the market, you need to behave differently. But how do you actually change your thought process?
Disconnect from the $ Sign
Most of you reading this have entered the market for one overarching reason, and that is to change your current financial situation. That desire can be a hindrance to your success. When participating in the market, if you are desperately trying to make money fast (keyword: fast), it can lead to poor decision-making in trade entries, exits, and management. So, to actually have success in the market, you need to detach yourselves from dollar amounts and focus on percentages.
Oh great, now you still lose money… what next?
Most of you reading this think you are following a trading plan, but looking back on past trades, you find inconsistencies in your approach or risk management. You end up thinking you are doing something when, in reality, you are not.
Key Fixes
- Stop moving so fast, slow down your process and go after the low-hanging fruit (or the trades that so obviously fit the system)
- Write down your plan before entry and stick to it. Your word is everything in trading, and most often, your first plan is the correct one, but when money is at risk, your accountability goes right out the window.
- Review your previous trades and journal. Make sure you are actually doing what you set out to do because most of you, even if you think you are, aren't.
To Sum It All Up
Remember, successful trading is about managing risk, staying disciplined, and consistently following a well-defined plan. By disconnecting from the dollar signs, focusing on percentages, and implementing these key fixes, you can transform your trading approach and achieve better results.
Take a moment to reflect on your trading habits and identify areas where you can improve. Then, put these strategies into practice and watch your progress soar. The journey to becoming a successful trader begins with the right mindset and a commitment to learning from both successes and failures.
So, go ahead and take the leap – your future self will thank you.