Trading success is no different to any other form of success. There are certain strategies that facilitate achieving our goals.

The first of these is VISION. I see ‘VISION’ as a motivational road map that encompasses all of the various facets of our life. Our participation in the markets is but one area of our activity and responsibility; success is much easier when all facets are in harmony.

The second is WRITTEN GOALS. You can’t get there, if you don’t know what there looks like! And because trading is a business, goals work best in the form of a business plan. (See Routines and Habits II). Your business plan includes having enough capital to see through the ‘ebbs and flows’ you will experience en route to your destination. There is a simple formula to determine the equity you will need to trade an account:

E = $R/%R

  • Where E = equity needed
  • $R = Dollar Risk
  • %R= % of capital risked

The numbers assume we have records that allow us to determine that our approach will generate an acceptable profit. To acquire this knowledge, we back test the method or setup and after back testing, use CFDs to complete the testing. I say this because we can trade CFDs with a smallish capital base because of the smaller tic/point value. For example CMC offers a point value per contract in the ES of US$1.00 as against US$50 in the E-mini.

Of course, being able to back test means we have a written plan. The aim of back testing and ’small-size’ trading is to define the edge of our written plans. In addition, the results of back testing and reduced trading size also provide the data for our money management plans. During this ‘practice’ trading phase, we also hone our journaling and self-review skills.

Part of the function of business plan is to outline what we will need for our trading: a budget outlining the expected income and expenditure, equipment (including data sources), our plans (trading, risk management and psychological - e.g. at what profit or loss extreme will I stop trading and for how long).

The third strategy is to identify the daily actions that need to be turned into habits. I covered this in detail in ‘Routine and Habits VII‘. But to restate some of the more important items:

  • Data collection
  • Journal Entries
  • Bill Paying
  • Trade Preparation (including visualization and trade management)
  • Provision for continuing research and education including time for deliberative practice (See The Psychology of Mastery and Practice) etc.

Finally we need to review the results of our actions in all areas of the business including the energy and money spent in our continuing education. Just as with our trading, we need to evaluate whether our actions are achieving the outcome we seek. If not, we need to change our behaviour; if they are, we need what can be changed to improve the results.

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