Millions of traders test their skill in the financial markets each year, but most are destined to lose their stakes and walk away with their tails between their legs. A select few defy the odds, churning out profit after profit over long periods, building the wealth, security and wellbeing that others just dream about. So what separates these elite traders from the mediocre pack and how can you gain membership to this exclusive club?
First, let’s consider what isn’t required to become an elite trader. You don’t need to take special courses or move to Manhattan and work on Wall Street for a decade or two, although many elite traders follow that path. Nor do you need a huge stake to start your journey, because you already possess the tools for slow and steady wealth creation. Finally, you don’t need to trade in a prop shop environment, heading into work each morning to commiserate with other like-minded individuals.
So, what does it take to rise above the crowd and supercharge your trading results?
Treat Trading as a Business
For starters, treat trading as a business, not a hobby or a slot machine. This takes effort, because most humans are burdened with deep-seated money issues that rise to the surface during risk-taking. Overcome these headwinds by drafting a business plan that sets forth a budget for required tools, like real-time news and charts, as well as by listing the markets, instruments and strategies you’ll trade. (See: Beginner Trading Fundamentals: Popular Trading Instruments.) Complete your plan with a realistic snapshot of monthly and yearly profit targets.
Keep Detailed Records of Your Trades
Keep detailed records of your trades, updating nightly and reviewing weekly for strategic adjustments. Supplement this work with a daily journal in which you post your observations and ideas, then draw upon the contents to add new features to your strategies and risk-control techniques. (See article: Risk Management Techniques For Active Traders.) Once recordkeeping is in place, settle in for the long-haul, because you need to pay your dues over three to five years to gain the insight needed to compete with the predatory crowd moving modern markets.
Become a specialist as early as you can in your trading career, choosing specific markets and styles that suit your temperament and knowledge base. You’ll need to find and master multiple trading edges, in which positive results for specific strategies can be reproduced at will over dozens of positions. All effective edges have one thing in common – an effort is made to control risk before seeking profit. Master that single concept and you’ll be well on your way to elite status.
Choose Your Information Sources Wisely
It’s easy to get caught up in the media circus, watching an endless parade of talking heads spout opinions that have no bearing on your daily workflow. Instead, turn off the television and subscribe to a real-time news service that gets you the facts, unimpeded by bias or emotion. Add a selective Twitter feed, following no more than 75 carefully curated sources and you’ll be watching the same news flow as Wall Street’s finest. (See: 5 Best Apps For Active Traders.)
Find a Quality Mentor
Now comes the tough part. To become an elite trader, you need to learn from the best. That’s a tall order because self-proclaimed gurus are everywhere, hawking in their chat rooms and newsletters. Sadly, few of these folks have the information, experience or long-term track record you need to raise your trading game to elite status. However, rather than avoiding these folks while seeking a mentor, it’s better to sample as many teachers, styles and approaches as possible to find out what works for you … and what doesn’t. In the process, you’ll come across a handful of helpful teachers who will yield a lifetime of trading knowledge.
Take Care of Yourself
Your final task could be the hardest, depending on your current lifestyle. Once you’ve chosen to walk the elite path, you need to monitor personal habits and interpersonal relationships. Drug use, poor nutrition and insomnia undermine the mental faculties required to take money out of the market each day. Add in marital discord or fighting with parents and there will be even more chances for your money and your discipline to be lost through your positions.
Understand the deep connection between how you feel and your bottom line results. Financial markets are the worst place to deal with personal issues, so clean up your act and quit smoking, get to the gym and buy your spouse flowers. You’ve got important work to do and need to be at your best to trade at the top of your game. (See: How Professional Traders Learn From Their Mistakes.)
The Bottom Line
The elite trader develops a serious approach to the financial markets, weighing risk against potential reward at all times. They hone their craft through detailed recordkeeping, carefully chosen data sources, well-defined trading edges and lifelong connections with mentors who will guide them to the next level of achievement.