This article is worth millions of dollars! Trading is simple yet extremely difficult, let me explain. First let me give you an example; building a house is fairly simple and common for contractors and architects, that is. Hundreds of houses are being built every day. But if you or I tried to build a house, we would have one big mess and might I add; one big headache! So what’s the difference between contractors and me? Simple, they know how to build houses and I don’t. The same goes for trading the markets! If you don’t know how to trade the markets, trading is going to be extremely difficult, if not impossible. People have to go to a 4 year college for almost every profession, but when it comes to trading, they jump right in with virtually no training. This can be devastating for you and your finances. So please, DO NOT TRADE without getting the proper education!
There are 5 essential keys for trading success. They are:
- Sun Tzu says, “He will win who knows when to fight and when not to fight.” The trader who knows when to trade and when not to trade will be successful. Sounds easy and reasonable but when it comes to money people usually aren’t reasonable. You don’t have to trade every minute of the trading day; in fact, if you do the odds of success are slim to none! The #1 Key to trading is having the patience to wait for the right opportunities. This is easier said than done. Have the patience to strategically wait for the right opportunities takes discipline and most traders do not trade using reason or discipline. My best saying is “Learn to do Nothing”!
- Sun Tzu says, “He will win who knows how to handle both superior and inferior forces.” Meaning, he who knows how to handle both wins and losses; good times and bad will be successful. I love losers! That’s right! I love both my wins and my losses. If a trader cannot be indifferent when it comes to winning and losing, he cannot and will not be successful. Period! You will have losses. The key is to lose fewer times than you win. You have to remember this is a long term venture. I like to consider trading like a football season. There are four quarters in each game (1 year). Each year is one game. 20 games in a season, so you can see it’s a long season (20 years). You must think LONG TERM; I can’t state this any clearer!
- Sun Tzu says, “He will win whose army is animated by the same spirit throughout all its ranks.” The trader that is in the same spirit with the market, himself, his system, money management and discipline will be in harmony; i.e. successful. If you or your system is not in harmony with the market, you cannot succeed. First you need to understand that the market is NEVER wrong. When traders lose it means that they are not communicating with the market properly or not at all. If you understand that the market is NEVER wrong and that the market flows, you will be able to communicate and co-exist with the market. You must understand that your communication with the market will NEVER be perfect; therefore, you will always have losses. If you cannot handle losses, do something else. Trading, like life, will be full of small bumps in the road and great triumphs. The key is making sure that they are SMALL bumps and GREAT triumphs.
- Sun Tzu says, “He will win who, prepared himself, waits to take the enemy unprepared.” Attack when it’s time; be patient. Trading first and foremost is about managing risk, and one of the key secrets to successful trading is knowing when and when not to trade. As successful traders know, you have the advantage over the markets if you pick your points and you’re patient ‐ if you wait for your trading method to setup properly to give you the best chance of success where the opportunity for profit is high and the risk of loss is low. I always say, “Lose your patience, lose your shirt.” and “Patience is not a virtue for a trader, it is a necessity!”
- Sun Tzu says, “He will win who has military capacity and is not interfered with by the sovereign.” This is crucial. You must be studied in the art of trading and not interfered with by things that do not affect your trades, such as, taxes, commissions, gains, losses, clients, IB’s etc. Do not let these items affect your trades, trading strategy, or your trading plan. Trading is hard enough without worrying about these items.
I seriously hope you read this article several times. Like I said earlier, this article is worth millions. Get the proper trading education. Here are some general attributes that a good trading method should have. Does your current method exhibit all these properties?
• A good method is one that is easy to understand or else you will not follow the method even if it produces favorable results.
• A good method will use no more than a handful of technical indicators from the hundreds available, but use them in an uncommon way to give the trader an edge over other traders. My indicators are not the normal indicators you see on most traders charts. I’ll talk more about this in a minute.
• A good method will provide you with an edge (that puts the odds in your favor) when trading the markets, but it will not be a black box mechanical system that spits out buy and sell signals with no forethought. This is a common misconception on the part of beginners and is driven by the erroneous belief in the Holy Grail.
• A good method also allows you to easily manage your trades once you have entered the market requiring only minor adjustments to your stop orders each candle. If you are following me on the daily charts then you only have to make decisions once a day for about 10 minutes.
• You know; Smart traders are nodding their heads right about now, and they also know that all of this can be accomplished in a matter of TIME. All you need are the Tools.
To Your Trading Success,
John Vasquez
