Essentials to Trading Success

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There are many essentials to trading success, as over 90% of traders fail. The number one essential is RISK MANAGEMENT. This involves having defined risk on every trade you make, and allocating a low percentage of your trading account to each trade (no more than 5%). Everyone has losing trades, but limiting your losses is one big key to success. Of course you need winning trades to make money, but using stops and cutting your losses early is the most important thing. There are many trading methodologies that you might have tried already, but if you have poor risk management skills then any strategy will fail. So remember this, because I cannot emphasize this enough. Know your risk before you enter every trade
Another key essential to trading success is FOCUS. You need to focus on PRICE, because this is the only thing that pays you. Get rid of all the distractions like media, chat rooms, and following “everyone” on twitter. Too much information sets you up for failure. There is always a reason to buy and another reason to sell. If you are keeping it simple and just focus on price, you will increase you chances of success.
I have said many times you do not need to trade everyday. In fact, there might be times where there are no good setups for many weeks. Of course I will keep you updated with these chart setups, but there can be times when our target entries just do not get hit. This is one reason why I do suggest subscribing annually. This enables you to have more PATIENCE and allows you to wait for the proper setups. Some of the biggest mistakes you can make is forcing on trades, because you are bored. This is a huge mistake, and you will pay for it. Remaining patient for the next calculated entry is essential to trading success.
Being DISCIPLINED and staying with your trading plan is also essential in having trading success. If you are doing well and succeeding, it is easy to gather a large ego and drift away from your keys to success. In addition, if you have a losing trade, you need to put it behind you and do not try to get the losses back immediately. Remember to stay disciplined and stick to your trading rules.
One last very important essential to trading success is CONVICTION. Now, too much of anything is bad, but you do need to have conviction in all your trades. You need to believe in yourself and believe in the trading methodology. Have confidence that the charts are using price, and price never lies. If you stick with the high probability trades, have good risk management skills, stay focused, be patient, and use discipline while having conviction, you will be on your way to a long successful trading career.

If you are under performing the stock market with your trades and investments, it is never too late to upgrade to Fitzstock Charts https://fitzstock.com/ 

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I look forward to helping you meet all your investment and trading goals.

David Patrick

Fitzstock Charts, LLC

10 thoughts on “Essentials to Trading Success”

  1. David, Thanks for posting these again. Now is I can put these to work and stop my FEAR of losing a profit maybe I will get better at this.

  2. David

    Do you cover, anywhere on your site, a set of rules/guidelines on when to take profit – exit a position?

    Thanks

    John

  3. John,

    I generally take some profits when the options generates profits of +5% (scale 1/2), then leave a runner to run. I do this to reduce risk. However, it is very important that you leave a runner on to continue to pay you, on your winning trades (i.e- there have been many 50-70% winners on option runners over the last few weeks)

  4. Thanks David.

    One more quick question. Do you set stops on your options trades? If so, do you do it by stock price or option price ($ or %).

    Thanks

    John

  5. When you say you set your profit at 5%, do you mean 5% profit of the whole trade or 5% of when you sell? For example: You buy 10 contracts at 5.00 each. To achieve 5% the option price would have to go to 5.25. If you scale 50% (5 contracts at 5.25), your profit is $125 (2.5%) on the 10 contracts you bought. So, should the option price get to 5.50 before you scale 1/2?

  6. Hi David,

    You talk about having defined risks on your trades, and allocating a small percentage amount to each trade (5%). Do you mean, for example, 50k acct total, 2500$ max per trade, ie, buy 100 shares at 25$=2500$? what would be an appropriate stop loss on this example? Sorry for the rookie questions

    Z

  7. Jaime,

    If you have a $100k account, you are allocating $5k to an options trade (or not more than 5%). Your stop should correspond to your risk profile (day traders use the lows of the day, hybrid use the previous days lows, and swing traders use the spreadsheet stops). For equities you can allocate more than 5%, but should not be risking more than 2.5%(for losses). i.e- $100k account, you do not want to lose more than 2.5% on any given trade. So, you will need to figure out how many shares to purchase to correspond to your risk profile stop. If AAPL trigger was 100 and the stop was 95, (risking $5), and you were only willing to lose 2.5% of $100k ($2500), you would take $2500/$5(which is the stop) and that gives you 500 shares(max). If you have 500 shares of AAPL from 100 and got stopped at 95 , you would lose $5 x 500 shares or $2500

    Everyone has a different size trading account and different risk profile.

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