Christmas Wishes – 2020

Firstly our very best wishes to you and your families at this Christmas time and thank you for reading our Blog posts throughout this difficult year.  As the trading year draws to a close, it is a good time to take stock and analyse how you have done in 2020, what you have achieved and what could be improved upon in the coming year.  If you can spend some time reflecting on your trading year you should be able to:

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Let’s Talk About Money!

At the recent Smart Traders’ Online Bootcamp, organised by Round The Clock Traders, I gave a talk about ‘How To Build Your House of Trading’ and during the subsequent Q&A the topic of Money came up.  The usual questions of ‘How much money do I need to start trading?’ and ‘How much money in percentage terms of my trading capital can I make?’ etc, came up. These are fair questions to ask, but in broader terms, Money can have a funny effect on us and our Trading Mindset.

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How Sharp Is Your Edge?

When learning how to trade the financial markets, you need to learn a strategy or two to get started, most will find something off the internet or pay for one. The issue then is how good is that strategy and probably more importantly could you actually employ that strategy to profitable effect. Reading and knowing the rules is one thing but actually implementing them in a live market is another thing entirely. So it would make sense to be able to learn the strategy and how to implement it in an environment that is less testing in the first instance. Once you have learnt the strategy and how to use it then wouldn’t it be a good idea to find out how effective it is in different market conditions. In other words try and ascertain if you actually have what is termed as an Edge. An edge is knowing that over an X number of trades you will be profitable. You only need to be profitable 51% of the time to be profitable if you control your risk. Once you have a proven edge, wouldn’t it be good to be able to improve it. If you could improve your edge to around 60:40 win loss ratio then you would would have a significant edge on the market. This can also be done off line by back testing.

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The Fine Line of Trading

The difference between being a consistently profitable trader and a inconsistent or losing trader is a fine line. To stay on the Profitable side of the line requires a trader to have mastered the many facets of trading, including planning plus employing robust risk and money management and be very structured in their approach to the markets, by having a pre-determined set of rules they will apply and adhere to at all times.

By developing a proven structured approach to trading, a trader starts to stand a chance of being profitable. By having structure, rules and plans helps the one tricky area of trading which is the Trading Psychology or Mindset aspect.

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