At a recent weekend traders roundtable discussion, the topic of the keys to trading success came up.
Experienced traders with different styles and different favorite markets and techniques identified what they thought were their best pieces of advice for novice traders.
It was late in the day and adult beverages may have been served and so our creativity was perhaps in full force.
What finally emerged from our freewheeling discussion was the idea of the 8 “P’s” of trading success.
After we discussed each of these concepts, ourinsight was that your trading results were probably shaped by the concept you were least effective with. At least, that is our working idea. Here are the eight keys that we identified:
- persistence: there have been a lot of studies that suggest the most important component of success is grit. You’ve heard the saying that showing up is 90% of the battle. Trading is so complex and uncertain that persistence is crucial. It’s the willpower to keep going in the face of obstacles.
- preparation: there’s no substitute for having a detailed trading plan to help guide you through complexity.
- participation: you can’t make money in the market by being on the sidelines.
- practice: repetition breeds muscle memory and for traders, mental memory.
- performance: trading is a bottom-line business and at the end of the day, month, year you have to to make money.
- perception: this ranges from how you perceive the market, how you perceive a system working, and how you perceive yourself.
- position sizing: this ensures that you stay in the game even when you get the direction wrong. Position sizing allows you to achieve your financial objectives.
- preservation: you have to take care of yourself, your family, your capital, your sanity, your sense of humor, and your profound sense of self.
In future essays we will go deeper into each concept, but the short discussion will get you started.