As we close out another successful year of trading, I’d like to offer some actionable tips to jumpstart your trading in 2022 and help you make this the year of consistent profitability!
Today, we will go through 3 tips and areas of focus that could make all the difference in your trading career and help you get to the next level in your trading.
1: Develop a Defined Trading System with Edge
This is arguably the most important aspect of successful trading. Trading without an edge is gambling at its truest sense. To make 2022 a successful trading year, clearly define your trading edge. Stop strategy hopping, stop taking random trades. Avoid overtrading at all costs and define specifically what you need to see in a trade to validate it as one that matches your "system" or "edge".
What are you exploiting in the market? How does that come across in the charts and real-time execution? Does this methodology make sense to you and fit your lifestyle, personality and goals?
If you are struggling to define what makes a good trading system for yourself, the best bet is to start with a strong foundation of a system that works for someone else and tailor it to your own needs. You can learn all about my trading strategy developed in over 15 years of hard work here!
Making a system work for you is ultimately the most important part. There are many trading systems out there, finding the right one for you will come down to your understanding with the method, the alignment of your personality with the method, and how hard you work at mastering and innovating nuances of the method to build elite confidence.
2: Constructing an Appropriate Risk Management Framework
Many of us have stumbled onto profitable edges, but did not have the proper risk management to adequately compound bankroll. What does that mean? Risk management is essentially capital management. The methods and tactics you follow in your trading business to protect your capital and grow your capital when the opportunities present themselves.
An example of a risk management tactic is defining how much you will risk on any given trade or setup. For many of us, we have a max loss per trade and a max loss per day as part of our trading system, so that you never have any unrecoverable setbacks. You can learn more about our risk management system in this free video!
Here is a list of important factors to consider when building out your risk management framework:
- Trading style (Win rate, average loss/win, frequency)
- Personality and comfort with risk (how much risk and volatility can you stomach?)
- Experience (If you don’t have as much experience, it is important to keep risk as small as possible to first learn the cognition skills needed to execute well. An experienced trader may accept more risk and thus more volatility)
- Goals (While you cannot force returns out of the market, you can structure your risk in a way to meet your trading goals responsibly. Work out your win rate, risk/reward on average and the dollar risk needed based on this on a X number of trades to attain certain benchmarks)
- Market Conditions (It isn’t always favorable to have the same risk on all the time. Sometimes our strategies fall out of favour in certain market cycles and so we must adjust our risk in order to protect capital, both mental and physical, for the more conducive market conditions)
Tip #3: Surround Yourself With an Excellent Trading Community
Trading is a tough business and it can be very lonely to walk this path. Having a team of professional traders to bounce ideas off of, share stories, talk about trades, motivate you and work together with will help your trading in a big way. Often, we focus on working on ourselves and leave growth to just that aspect, the personal side. But how often do we intentionally try to improve our environment?
The old cliché, “You are the average of your 5 closest friends” is a true adage yet we don’t intentionally try to surround ourselves with the types of people who are going to help us catalyze growth. This year, make it a priority to surround yourself with professional traders in a professional community, to aid you on your journey to successful trading. Build relationships with other successful traders and layers of accountability to your business through them. Any way you dice it, joining a professional group of traders will boost your trading performance if by no other form than osmosis.
Wishing you all the best of success in the New Year from your friends at LiveStream Trading. Have a fantastic 2022. and as always, our doors are open for those who are ready to make the turn into profitable trading - see you on the inside!