Yvan Byeajee January 24, 2022
I’m sure you’d agree, being consistently profitable in the market sounds simple, and it is [in theory]. But in practice, it’s harder than it looks. Consistent profitability is so difficult not because the market is rigged against you, rather it’s because your own psychology is rigged against you.
Consistent traders know this. They know that often the only thing keeping us from letting a winning trade run or cutting a losing one or hesitating to initiate a trade is the stories we tell ourselves. And that’s why these traders have trading rules and principles they abide by.
Rules and principles are important and protect us from our own inconsistencies. Rules create a consistent market framework and way of behaving from which consistent results can be possible. Principles are fundamental propositions that serve as the foundation for our beliefs and behavior. They make sticking with our trading rules easier.
So, to break away from the pack and join the minority that wins, you need both rules and principles. Now, I assume you already have trading rules. Every serious trader does. But principles are a little less obvious. In this post, I share 12 principles that long-time pro-traders use to stay in the winner’s circle.
#1- You Do Not Control The Market
Like it or hate it, this is the truth. As a retail trader, your positions likely won’t move the market in any significant and observable way.
And so…
#2- Whatever Is Going To Happen Will Happen
Your job is never to react blindly, based purely on emotions. The trading game is all about strategic maneuvering in an environment with no absolutes or provable certainties.
#3- Trading Is A Journey Of Personal Growth
As a trader, you will learn lessons about the market, about yourself, about human behavior… essentially, you are enrolled in a full-time, informal school called The School Of Hard Knocks. The lessons will occasionally hurt. You may even think they’re irrelevant and stupid, but how you perceive these lessons and what you make of them will either make or break you.
#4- There Are No Losses, Only Lessons
Growth is a process of trial and error; it’s a process of experimentation. The failed experiments are as much a part of the process as the experiments that ultimately work.
There is a huge amount of freedom that is derived from accepting what the market gives, whether it’s profits or lessons.
#5- A Lesson Is Repeated Until Learned
Once again, you’re enrolled in The School Of Hard Knocks. And it’ll serve you lessons in various forms until you have internalized them. There’s no way around that. Focus on being a good student and you’ll grow faster.
#6- Trading Is Hard
It doesn’t matter how long you’ve been trading; how much of an expert you are, at times trading will be emotionally strenuous—it’s in the job description. So, you might want to add things like meditation, yoga, exercise, and writing to your routine as these will help alleviate some of the stress.
#7- There Are No “Expert Traders”
You read that right. There are no expert traders because the market never stops teaching. And it can be a stern teacher, especially to those who think they’ve figured out everything.
#8- There Will Be Drawdowns
Sometimes, you’ll go through periods of drought. You’ll put in the time and effort with no immediate rewards … nothing to show but losses. That’s the reality of trading. Patience, perseverance, and perspective are indispensable qualities of traders with long-lasting careers.
#9- There Is No Holy Grail
New traders often fantasize about a secret formula to trading success. In reality, there are no secrets. The market is a dynamic process―what has consistently worked yesterday may not work today. All systems and strategies go through winning and losing phases.
Consistent profitability is a balancing act. It’s about understanding the inevitability of drawdowns. It’s recognizing the market phase(s) you thrive in. It’s pushing the gas pedal when it’s easy for you to make money and releasing it when it’s hard for you to make money.
#10- Nobody Has A Crystal Ball
I’ve said this before, people who tell you that they actually know what the market will do are just throwing shit at the wall and seeing what sticks. Or they’re simply talking up their positions, hoping the chatter increases their profits, not yours.
Here’s how you make it in this field: You stay engaged, you cut out the noise, you remain humble, and you do whatever you can to stay in the game long-term. Essentially, you let the numbers work for you.
#11- Your Money Beliefs Will Make or Break You
Being too attached to money and unclear about your abundance and scarcity changes of heart gives way to flawed decision-making. As a trader, your job is to capitalize on other people’s fear and greed around money, and you can’t be good at that job if you yourself haven’t sorted out your own money insecurities.
12. Your Equity Curve is Your Mirror
When you look at your performance, do you see months of consistent profitability followed by massive drawdowns? This is a reflection of your inconsistencies. Your equity curve is your own image.
The answers to trading’s conundrum lie inside of you. All you need to do is look within and reinforce positive qualities and behaviors. If you can do that, money will eventually take care of itself.
The Bottom Line
Most traders fail to tap their full potential because they’re unclear about their principles. And they try to stick to their trading rules not knowing why they should. Sadly, it’s an uphill battle.
To become part of the minority of traders who are consistently profitable, you need to be crystal clear about why your rules are important—and principles help you know.