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Nick Goold

Some novice traders believe there is an easy method to make a profit - a 'holy grail'. They watch successful traders and try to imitate their trading methods to make profits. Also, they research books and websites to find many trading strategies.

However, in most cases, even when you imitate other traders, you will not get the profit you expect. Trading looks simple, but it is very complex. Even with a simple method, it's impossible to make exactly the same trades as another trader because of the differences in personality, experience, and tolerance for risk.

Also, "intuition" might be a crucial factor affecting profits. The trader may be profitable because their intuition is working unconsciously. Usually, that can't be replicated. It's also hard to obtain accurate information about other traders' methods, and how much profit they are making with those methods.

Understand your strengths and weaknesses in trading.

Understanding your strengths and weaknesses is essential for successful trading. You won't understand these well if you imitate other traders, and you will eventually reach a limit.

To become a successful trader, you need to gain from repeat experiences, understand the strengths and weaknesses of your trading, and build a trading method that suits you.

  • What are your strengths and weaknesses?
  • Quality of Judgment?
  • Higher win rate on long or short positions?
  • Reluctance to take losses?
  • Tendency to take profits quickly?
  • Not good at making quick decisions?

There are many different trading techniques and trading styles. So, you first need to understand your trading strengths and weaknesses. You can then create trading rules that suit you. It will take time, but knowing your strengths and weaknesses will help turn you into a winning trader.

Building trading rules

For example, some traders have a good winning rate when they are in a buy position but not in a sell position. If this is the case, you can reduce the number of unsuccessful trades by limiting your trading rules to holding mostly buy positions.

Some traders feel somewhat uneasy when running a position for a long time. If this is the case, they should build a trading method that's limited to scalping, where positions are only held for a few minutes at a time.

There are different types of traders: some are better suited to short-term trading, while others are better suited to long-term trading. Each trader also has different markets that they specialize in, or they find trading strategies that suit them and specialize in those.

Validate your trading rules

You should always collect and verify the results of your trades, and determine whether you have followed your trading plan. You can then find the characteristics of your trades and update your trading rules to a strategy that suits your strengths, which is a step towards success.

Successful traders tend to trade less often, and they only trade in markets where they feel they have some advantage and therefore lose less often. When they have that advantage, they focus on entry points where there's a high win rate. They don't make money in proportion to the number of trades they make.

Traders shouldn't try to become experts in all markets and all strategies, but just in a few markets and specific strategies. Some traders thrive in markets with high volatility, while others thrive in markets with quieter price movements. Some traders prefer short-term trades, while others hold positions for longer periods.

Analyzing these answers will help you identify the type of trader you are aiming to be. Talking to other traders and learning which strategies they use and how they use them can also help you understand your suitability for those methods.

The best way to learn is to record and reflect on the results of your trades. After each trade, write down the strategies and methods used on a chart and compare the results. In addition, record how you felt while holding the position, whether you were able to concentrate on the trade or whether you felt stressed. Test this with different strategies and markets.

It is important to note at this point that it is not the result of winning or losing a trade. The aim is to collect enough data to understand the strengths and weaknesses over time, in weeks or months.

To become a successful trader, you need experience, an understanding of your strengths and weaknesses, and a trading method that suits you.