The Secret to Trading Success
April 23, 2008
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John Forman - The Essentials of Trading author
If you’re reading this blog post because you actually think there is some one thing that successful traders know that unsuccessful ones don’t, then let me first say:
There is no single secret to successful trading!
And by that I mean there is no secret wisdom passed down from master to pupil, or sacred texts sharing with readers the knowledge of the ancient masters. The idea that some traders are using secret techniques which ensure their trading success and that without those secrets one cannot possibly trade well is farcical. That simply isn’t the way of things. Sorry to disappoint you if that was your thinking.
Trading success comes from developing for yourself a good, well thought-out trading plan. That’s a plan which is based on your personal needs, strengths, interests, and all of that. This is something which takes time. It will not happen in one day. It takes exploring and learning.
You will often hear from successful traders that it took them a couple of years before they really found their feet trading. I know that was certainly my own case. You try things. Some work and some don’t, and you make adjustments.
Remember, though, that a trading system is not a trading plan. It’s only part of one. (see the series of articles I wrote about building a trading plan starting with Creating Your Own Trading Plan.)
Trading success also comes from being consistent. That means repetitively applying your trading plan over and over and over again. That probably sounds pretty boring, but the truth of the matter is that good trading quite often isn’t the most stimulating thing in the world - at least in terms of the execution.
Both elements of this are equally important. Not having a well developed plan will mean failure just as not sticking to that plan will. As Brett Steenbarger recently wrote in his blog:
“It’s a common observation that traders fail because they don’t stick to their plans. My experience is different. Traders develop plans and trade patterns that simply don’t work; they’re based on randomness. When the patterns don’t work, traders become frustrated and abandon their plans. So it looks like lack of discipline causes trading failure. But planning doesn’t create success; sound planning does. Sticking to plans based on randomness is no virtue.”
And it most definitely doesn’t stop there. Another secret to successful trading is that you must never stop learning. Steenbarger noted “The successful traders have a passion for markets, which is very different from a passion for trading.” and that ”The ratio of “practice” time (time spent on markets outside of trading) to trading time is a worthwhile indicator of a trader’s prospective success.” From a system trader’s perspective, Bill Rempel added “System development and testing never stops.”
Markets change and you must adapt to survive.
Actually, it all reminds of a movie that most likely you’ve never even heard of - A Circle of Iron. It’s based on a script written by Bruce Lee with David Carradine one of the lead actors. The hero goes on a quest to find the Book of All Knowledge. Of course he must overcome many challenges to find it. When he finally gets to read the book (spoiler coming!) he finds that it’s nothing but mirrors. It’s all very Zen, of course, but the lesson that the secret lies with you is very much the point I’m trying to make here.
So there you have the secret to winning in the markets.
Here are some other posts which might interest you:
I completely agree with the point made at the article’s end about the individual being the deciding factor in their own trading success.
If you ever want to be successful at trading, any goal, or raise your success to a new level then it is ultimately a reflection upon your own internal development.
I am always reminded that the internal intrinsic factors of having a willingness to cut losses quickly, the ability to stay with a profitable position while resisting the impulse to cash out, to stay detached from a trade that “got away” so that you can easily make the transition to the next trade, maintaining discipline while stalking a setup by resisting the urge to enter too early or the fear resulting in entering too late, and many other attributes are as much a factor if not greater than having a strong trading system.
In fact, having such a system often does one no good if they do not have some of these attributes in some degree or another.
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Does Your Book Contain “The Secret” - The “Book of All Knowledge” Reveled…
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I’m 100% with you that there’s no ‘hidden’ or secret knowledge that contributes to success. This reality hit me a few years ago when I attended a full Saturday conference with Linda Raschke, whom I considered at the time to be the best and most respected trader on the education circuit.
I was certain that spending a whole day with her would give me the secret I’d been waiting for. I actually couldn’t sleep the night before - I was so excited.
Only, when Linda came in, her first statement - perhaps an opening warm-up or general observation was along the lines of the following:
“There is no secret to trading success; no magic indicator that will make you instant profits; and no trading system that will always make you money. Believe me, if one existed, we would be using it and I would be in the Bahamas right now sipping on Pina Coladas and not with you all day this Saturday.”
That’s literally when it hit me - and John’s right on in this post. If there’s no secret for “Market Wizard” Linda Raschke, then it’s all about discipline, planning, balance, odds, probabilities, and money management.
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