e-Learning with the TradingMasteryHub - Growth is "simple"
Looking to unlock consistent growth in your trading? Today, we’re diving into a powerful yet straightforward formula that many overlook. Growth isn’t magic; it’s a process that involves discipline, patience, and following a few key principles. Let’s explore seven strategies that can lead you to consistent success.
1. Get Rid of the Idea that You Can Calculate Profit
It’s time to rethink profit calculation. Many traders rely on risk/reward (R/R) ratios to estimate their potential profits, but the truth is, you can’t predict how far the market will go or how volatile it’ll be on the way. Setting a profit target can actually work against you. Your brain becomes fixated on that goal, which can cause you to make irrational decisions, like holding on too long when the market is telling you to exit. It’s more likely that you’ll lose out by not taking profits before reaching your target than by missing an extended move.
Instead of trying to calculate profit, focus on managing your trades as they unfold. No one knows where the market will go, but you can follow the price action and let it lead you to bigger gains than you initially expected.
2. Always Use a Stop Loss
The stop-loss order is your best friend in trading because it’s the only thing you can control. A stop loss does more than protect your capital—it measures your discipline and ability to stick to a plan. It helps you stay aligned with your risk tolerance (what I like to call your “bud meter”).
Set your stop loss at significant areas in the market. The best place to put it? Where you’d place the opposite trade. For example, if you’re buying, put the stop loss where a sell order would make sense in the current market context. This prevents you from being stopped out prematurely and ensures you stay on the right side of the momentum.
3. Add to Your Winners, Cut the Losers
Adding to winners is a game-changer. Most traders fade out of winning trades too quickly because they fear giving back profits. But by adding to positions that are moving in your favor, you’re compounding your success. Don’t worry about getting in at a higher price—if the market is showing strength, it’s a sign to follow.
Let’s look at how most traders handle a winning trade:
- They take small profits at 1:1 R/R ratio, move their stop loss, and try to let the rest run.
- But in doing so, they lock in limited gains and miss out on the bigger move.
Now, here’s what the top 10% of traders do:
- Instead of scaling out, they add to their winners at each significant level.
- By adding small positions as the market runs, they compound their gains, allowing the trade to grow much larger than initially estimated.
This approach not only maximizes your gains but also lowers your risk on each successive entry.
4. Only Trade in Trend Direction
Trading with the trend is like surfing—catching the wave takes you much farther than paddling against it. In bull markets, overhead resistance zones are often broken, just like support levels in bear markets. These trends are driven by large institutional players, like hedge funds and banks. Retail traders only make up a small fraction of the market, so swimming against these currents is a losing game.
About 20% of trading days in major indices are strong trending days where the market moves in one direction all day long. To take full advantage of these days, you need to add to your winning trades as the trend progresses.
5. Seek the "Brain Pain"—It’s a Sign of Growth
Your brain is wired to avoid pain at all costs, and this can be detrimental to your trading. Most traders scale out of winning positions too soon because their subconscious is trying to protect them from the fear of losing profits. On the flip side, they’ll add to losing positions, convincing themselves that they’re getting a “discount,” even when the market shows otherwise.
To become a winning trader, you need to train yourself to embrace discomfort. This means adding to your winning trades, using stop losses that you can stomach, and cutting losses as soon as your brain starts to rationalize bad decisions. Losing should never bother you—it’s part of the game. What matters is your overall growth and consistency, not avoiding pain in individual trades.
6. Don’t Do What 90% of Traders Do—Be the 10%
Want to be in the top 10%? It’s simple: avoid the mistakes of the 90%. Here’s how:
- Always set a stop loss.
- Add to your winners, don’t fade out.
- Cut losses before they snowball.
- Trade the market, not your account—don’t take revenge trades to “get even.” Focus on what the market is showing you, not what your account balance says.
The market doesn’t care about your profit target. It only cares about price movement, so align yourself with it.
7. Analyze Your Trades, Not Just Your Results
The best way to grow as a trader is through post-trade analysis. Screenshot your charts, mark your entries, stop losses, and exits, and review them daily. This helps you identify both technical and psychological weaknesses in your trading.
Think of it this way: if you had a business partner who consistently made poor decisions, you’d fire them eventually. Be your own business partner, and change your behavior if it’s not delivering results.
🔚 Conclusion and Recommendation
Growth in trading is a simple formula: get rid of fixed profit targets, control your risk with stop losses, add to winners, and cut your losers. Follow the trend, embrace discomfort, and don’t fall into the traps that 90% of traders do. Analyze your trades with an honest eye, and over time, you’ll see steady growth.
Success in trading isn’t about perfection—it’s about discipline, consistency, and continual learning.
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