10 Steps to Becoming a Profitable Trader

Understand Your Beliefs and Expectations about Money

This will help you understand your objective and approach to formulating your trading style and how you make money from the markets. While the old adage is there’s no such thing as getting rich quickly, if you put in the time and work, there are trading strategies out there that allow you to extract money in minutes from the markets. Whether your objectives are to make money fast or compound your account over weeks and months at a time, learning the skills is what will take time.

Pick a Market

The beauty of trading is that there are a myriad of asset classes to choose from so it never gets boring! From currencies to stocks or futures and commodities. After choosing your market, you may choose one instrument or a group of them depending on your trading style. If you decide to trade lower timeframes and scalp, it’s best to stick to one instrument. The higher the timeframes you choose to trade, the longer it takes for price action to develop so for learning’s sake, you may want to choose at least 5 for your watchlist.

Understand The Markets

Gather the list of trading concepts and study them: Wyckoff Theory, Elliot Wave, Momentum, Volatility, Japanese Candlesticks, Quarter’s Theory, Chart Patterns, Timeframes, Indicators, etc. Research different brokers and pick one you’d like to open a demo account with then execute some trades and get to know the platform features. Choose a trading session that you know you can always show up to and study the price in real-time. Referring to the first point, it’s best to choose an instrument that aligns with the session you’re trading in; for example: You are trading GBP/JPY so you will be trading the London Session.

Interpret Fundamental Analysis

This will teach you about trading jargon and how to align your technical analysis to the news events when something comes out. One trusty and valuable resource to reference is the Forex Factory. You can use this site as well to help you interpret other asset classes too like Futures and Commodities. It’s good to get familiar with understanding high, medium, and low-impact news and how to plan your trades around them.

Set Up a Trading Strategy

The more concepts you understand, the better you can tailor your trading strategy. You want a strategy that can help you garner up as many confluences in price action as you can to help you formulate your bias. Your bias is what’s going to help you determine when and where to enter a trade as well as when and where to exit.

Backtest Your Strategies

Next, you want to take your strategy and test its efficacy. Depending on your trading style, you want to see how often your trade shows up during your trading time by looking back in time on your chart data and applying your strategy where you see its opportunity to then study the nature of price action, the candlesticks, and how the market structure is set up around your execution and exit points. This will prime you for the next step.

Forward-Test Your Strategy

After you’ve determined how you’re going to use your strategy and build your intuition from backtesting and studying, you’re going to apply your knowledge in real-time on a demo account. This action will help you develop your live trading muscles because the feeling of live trading is a completely different game. There’s a reason why it’s called a “live” market because the numbers on the screen are actually alive and you will quickly realize these moving metrics are manipulating your emotions and to what scale that may be, all depends on how you deal with your hand in the market—which should be wise and economical!

Practice and Master Your Risk Management

While you’re on demo, this is a good time to determine appropriate position sizes and risk limits to protect your trading capital. Risk management corresponds very much to how your psychology around assessing a trade works so demo trading is a great way to practice responsibility and apply better decision practices when it comes to managing your money. It is crucial to have unwavering discipline, self-control, and accuracy in maintaining your risk so as not to succumb to mistakes or the gambling mentality.

Create The Roadmap to Your Goals and Stay Disciplined

Develop a clear trading plan with defined goals: desired numbers and deadlines to meet within reason, curating and applying a compounding plan, sticking to the days you must show up to the charts, and following a set of trading strategy rules that you strictly adhere to.

Be patient and persistent

When quick money is possible in the world of trading, the process of learning how to achieve that status still takes patience and persistence like sitting still until your trading set-up appears before you. The feeling of impatience will eventually fade away in time as you rest in contentment and confidence. One day, you might actually enjoy every single moment of the trading process. When you’re truly passionate about trading, sitting with the markets seems no different from relaxing with your favorite steaming brew and crossword puzzle—I suppose as that cliche goes. Successful trading takes time and continuous effort. Just stick to the plan and never give up. Seriously, never give up. No matter what life circumstances are thrown at you, do not give up. You never know when that breakthrough is just sitting right around the corner.