To be a successful trader means to find an approach with mirrors your own identity. That’s very hard, because the most traders start their career when they are young. Often they have not the needed self-awareness and are in the middle of the journey to find out more about themselves. How do you want to know what suits you at that point in time?

What’s my personality?

It all begins with some basic assumptions. Look into yourself and ask yourself:

• Do I have fun with analytics?
• Am I a solver of abstract problems and challenges?
• Do I like programming software or mathematical algorithms?
• Am I an artist and do I like music, arts or graphic design?
• Is economics and economic relations one of my favorite topics?

This is very basic, but a point to start with. You must find something which suits you and where you already have some experience with. From biologic point of view: Where did you already build paths in your brain?

In that situation books about success and self-improvement can help. They often contain methods to find your personal strengths.

If you don’t work on that topic, you will never become a successful trader because you will never find an approach which suits you.

Forget predefined trading methods

I am very sure that the most traders will fail if they use trading systems from other people. They don’t mirror your personality and that’s the point where you start to sabotage it.

It doesn’t matter if you use an automatic trading system or a discretionary trading approach. If you can’t accept the outcome and decisions you will start to sabotage it. That’s why it’s so important to find a compatible approach.

You must start the journey of finding your own approach. In that journey trading approaches of other people can be an inspiration. Sometimes they match your personality to a high degree and you only have to adjust just a small parameter. In other cases you have to develop a complete trading system by yourself to accept it completely.

There is no shortcut

Finding you own trading style is a difficult thing and there is no shortcut. Often it means to get familiar with yourself and your identify.

Mistakes are unavoidable on that path. But every frustration and mistake will bring you closer to your goal. It is important to reflect your mistakes and your actions to learn from them. And be sure: Your journey is never finished because your personality will change over time. I am sure that you will be a different trader in 10, 20 or 30 years.

There are some sources which helps a lot:

• Books and videos about success, psychology, motivation etc.
• Biographies of other people.
• Spiritual books, videos and courses.
• A good mentor or coach which helps you.

In a nutshell: Use everything which helps you to know more about yourself!

My personal experiences

If I look back I can’t say exactly where I started as a trader. My interest in trading got stronger over time until it started to be my passion.

At the beginning I struggled a lot and tried every approach and every trading instrument. One month I was a pure technical and the other I was a fundamental technical trader. The next months I traded stocks, the other I traded certificates (popular in Germany). I tried different subscriptions of German trader platforms and newsletter …

But when I look back, certain things always accompany my trading career:

• Cutting losses with a stop-loss order always made sense to me. Maybe that based on my thinking about a businesses. You must make bets, but the bets must be small enough not to lose everything you own.
• Trading stocks. Although I traded every trading instrument on earth, I tended always to trade stocks. I like to understand what the company is doing and I have a strong attraction to technology and innovation. I have a lot of knowledge in this field and can assess how important a special technology is.
• Technical analysis. I am a very visual person because I started in the graphic design business. That means I have a trained eye and can quickly find patterns inside a chaotic image. I also like music very much. That makes me familiar with patterns and rhythms.
• Rule based discretionary trading. Although I make some analysis, this is not my strength. I believe in experience, craft and rules. Rules helps me to improve my work and experience helps me to find rules. I can develop simple own screener and indicators, but I can’t develop automatic trading systems. That’s why I always used a rule based discretionary approach. I tried some more systematic approaches in the past but I can’t stick to them. It doesn’t feel right and was not compatible with me.

I never would say that I am at the end of the journey. I always have fields where I struggle with. In the last months I tried to find out how important fundamentals are in my approach. Today I can say: Not so much. But I am very sure that there will be some challenges in the future. As long as my personality growths and changes I will be in the journey to find my own trading style.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”007174908X,1118273052,0062315005″]

Der Beitrag The Hardest Thing About Trading … erschien zuerst auf Trading Blog - Julian Komar.

Below you find my top 10 learnings. I collect that wisdom from my mentors, Market Wizards and other traders. They helped me to get better and better as a trader.

1. Chart your own equity curve

This is a recent advice I learned from Olivier Tischendorf. He wrote a great article about that: How To Profit From Charting Your Own Equity Curve.

If you chart your own equity curve day by day you will have a direct feedback of your trading. You know exactly how you perform, when it’s time to be aggressive and when it’s time to step on the break.

More information in my own article: Learn to manage your own equity curve.

2. Sell a trade quickly if it drops below the breakout point

I am convinced that a trade should be a winner directly from the beginning. All my huge winning trades shows that characteristic. If the trade instead is falling back below your entry point you should sell it quickly. Something seems to be wrong.

Such a radical trade management is not an approach for everyone. You must be very disciplined. But the good thing is you can lower your average loser a lot.

Learn more about it: An example in trade management – the breakout stop.

3. Trade only the strong stocks

There was a time in my trading career where I trade stocks which dropped and then started a new trend. You can name such stocks as reversal stock or turnaround stocks. There is nothing wrong with this approach but it’s not mine. I was never good in it.

Instead I learned to select leading stocks which are strong, printing new all-time highs and show strong volume characteristics. It helped me a lot!

4. Focus on a trading niche

Of course there are traders out there which are flexible and can trade any market. But that’s not me! I believe in focusing on a trading niche. That’s the only way you can gain a lot of experience.

I focus mainly on momentum stocks and leave other markets for other traders. Rarely I trade forex, commodities or indices.

5. Day traders, swing trades and scalpers do not make more money as other traders

A long time I believed that fast traders are making more money that slow traders. But always if I looked into a trade record of a day trader or scalper I noted that’s not true! In a lot of cases the long term oriented traders made more money. How is it possible? Simple: 5% a month is 5%. The approach to create 5% is not important.

That does not mean that there are no good day traders out there. It only means that you don’t have to be a day trader to make a lot of money.

6. Excessive risk-takers are mostly bankrupt

I always was blended by social traders which had accounts with profits of 400% or 1000% in a short time. I always asked myself: How did they do that?

One day I saw a social trading account of such a trader. It has a draw down of 90%! That’s pure gambling. Of course there is a possibility to recover from that. But in the most cases they close the account and start a new one.

7. Clean and simple charts are the best

If you believe you have to make complex technical analysis, you are wrong. I found out that the best trades have very simple chart patterns. There is no volatility and huge price swings. Follow Patrick Walker on Twitter and you will learn a lot about “clean and simple”.

8. Do everything to protect your confidence

Today I know how important confidence is as a trader. But there is not a universal truth what confidence means. Maybe for you it’s your rule-set and blindly follow them. For another trader it’s his ability to select good stocks. The only thing which all have in common is that they believe deeply in their principles. And that’s why you have to defend your principles and believes against any threat.

There are times when my equity curve shows high volatility. In such a time I start to close positions. Yes, sometimes they still fulfill all rules and maybe I am cutting potential profits, but my confidence is more important. If you have a deep draw down you don’t only lose money but mental capital, too! Ed Seykota said famously: You have to know when it’s time to break your rules.

9. There is intuition in trading

There is a myth in trading that you should act like a robot. There was a time when I believed this myth, too. But today I look differently on that thing because I read a lot about the brain and intuition.

Intuition developed with experience. The more you learn about a thing the more intuitive you get about it. It’s like driving a car or cooking. You know exactly what to do without thinking about it deeply. That same experience you can have in trading, too. If you look at hundreds of chats a week, you intuitive know which one looks good and bad.

10. Working on yourself is the best method to mastery

As I started to read books about motivation, psychology, self-development, philosophy and time management I not only got better in my job, I got better as a trader, too. The basing principles of success are the same in any job. You doing outside of your job influences your job.

I absolutely recommend not to read only trading books. Start to read books about self-development and -management, too. You will find a lot of inspiration and you can transfer a lot of methods into your trading world.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0735201447,1848549253,014312417X,0062315005″]

Der Beitrag The 10 Best Trading Tips I learned from other Traders erschien zuerst auf Trading Blog - Julian Komar.

But how to gain this confidence in your own trading? Is the only way to wait 20 years and make thousand of trades?

In the last months I thought a lot about “mental capital“. With mental capital I mean the trust and confidence in your own trading. This can increase and decrease, depending on your experiences in the market. Example: As big loss can decrease your mental capital which leads to a more defensive behavior. The opposite is possible, too. A big profitable trade can boost your confidence and leads to over-trading.

It always comes back to trading psychology … If you call it mental capital, trust or confidence is irrelevant. But I made some experiences which I want to share with you.

5 points to build up more confidence in your trading

Here are some points and experiences which helps me to gain confidence in my trading:

1. Charting your equity curve: This helped me a lot. It brings transparency in your trading and shows the results of your action. Especially if you have an edge in the market it will boost your confidence because your equity curve is going up!
2. Positive outcome: If your trading is profitable it helps you to get more confidence. It’s not important how much you are making, it’s more important that your trading process results in a positive outcome. If you are not profitable, change or optimize the process.
3. Tweak your approach: You must tweak your trading approach until it matches your personality. F.e. I implemented a scaling out tactic because I hate it to give back too much of my open profits. This leads to a smoother equity curve and increased my trust.
4. Rules and best practices: Always if you see that a rule helps you in your trading, you build up confidence. Especially risk management rules are a good example. I hate too loose much of my capital in draw downs. That’s why I have risk- and money management rules to reduce my position size and cut my losses strictly. I have a high confidence in that rule-set because it prevented me of big losses and draw downs.
5. Have a positive mindset: You must work on your long-term mindset. If you don’t think that you can make it as a trader, it will block you form a positive outcome. You must develop self-confidence and a positive self-attitude. Read books about success, motivation and role-models. Look how they did it and look that they startet the same way as you …

Why confidence is so important

I startet with the points to build up confidence, because I gives you some practical examples. But the you must understand the background why confidence is important, too.

In trading all comes down to the psychology. Markets and trader are driven by emotions. This is true for systematic trader, too. There are hundreds of ways to sabotage automatic trading systems. But especially as a discretionary trader you have to know how your confidence influences your trading.

I would say: The more confident you are, the better are your results. Why? Look at these points:

1. You will take your signals, because you know that it will end in a positive outcome.
2. Rules will be accepted and followed. You saw that they had a positive influence.
3. You are in a state of “flow” where everything is easy and fun.
4. Every trading opportunity is recognized and evaluated. You take only the best situations because it matches your plan.

You can see that confidence has a direct influence on your trading. This is why you have to maintain it and never decrease it. The decrease will come automatically in that times if your trading is not working.

But be warned: Too much confidence is a problem! You want not to be over-confident, because it will bring you to fall. With a too high confidence you will sabotage your plan, make too big bets and think everything will go on and on. But the markets and trading are never linear. One day the mood of the markets will change and your trading is not working (for some time).

5 points to maintain confidence in your trading

Maintain and build-up confidence is nearly identical. But to maintain confidence your had to build it up first. That’s why you know to do it.

Here are some tips for maintaining confidence in your trading:

1. Look back at your results: Analyse your equity curve and trades. Why did it work? What was the situation in the market where your trading worked? You must be clear about the time your trading approach works.
2. Trading is a craft and skill: Be sure that the mindset of a trader is adaptive. It’s not rigid to one market or approach. If the stock market is a bearish situation look at other markets. Can you apply your trading approach to forex, commodities or fixed income? What’s about inverse ETFs?
3. Distract yourself: If you have no edge in the market, do not apply your trading approach. I know, I want to be in the markets all the time too, but this leads to losses. That’s why I do other things if my trading is not working: Reading, writing, analyzing, other businesses … If you try to trade a trading system with no edge, your trust in that system will be pulverized over a short term.
4. Have role models or mentors: Especially if you are a beginner, you need role models or a mentor. They solved a lot of problems and overcome a lot of situations. You can profit from their confidence and experience.
5. Work on your mindset: Have a long-term perspective. Think about the next 1000snd trades and 20 years. I know it’s hard, but you will not make millions of dollars in a short time. Of course I want to do this, too, but that’s not how trading works. If you want to have the chance of a million dollar with one click: Play the lottery! Instead read some good books and blogs about motivation, success and self-help.

Like everything else you have to find your own way. I stumbled about a nice quote: I don’t think trading can be taught, but it can be learned (source unknown). I am sure that everyone who want’s to be a market wizard will find a way. And she or he will find a way to build up and maintain confidence in their person and trading.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”0735201447,1118273052,0996307923″]

Der Beitrag Build and maintain confidence as a trader erschien zuerst auf Trading Blog - Julian Komar.

The most people want more. They want more from everything they can get: Time, money, food, houses, cars, love and so on. But we know that it’s not possible without giving up something else. That means: To have more money we have to give up time or energy or … It’s always a trade between two goods.

But there is one thing to consider. You can get a lot from one thing if you focus on it. Why? You spend all your energy on one sector. This is a big trade-off but in the end you get more. A lot of successful companies do that. In addition you find the saying “less is more” in many self-help books.

Focus on a small niche and reduce complexity

Trading is not different from the rest of the life. If you want to master something, you must have a deep knowledge about it.

In my trading journey I learned this the hard way. At the beginning I was doing everything I could do. I traded stocks, commodities, forex, certificates … But this was just distraction.

After some time I discovered that I could build much more knowledge and experience if I focus on one thing. I started to focus on only stocks and my trading improved.

Why did my trading improved? Simple: It reduced the numbers of trades I made. And it helped me to focus on situations where I have an edge.

If you trade multiple markets (stocks, commodities, forex etc.) you have to build up knowledge in all of them. You must consider a lot of dependencies between the markets. This can lead to situations where you increase your risk instead of decrease it. The reason: Some trading instruments have a dependency, f.e. Gold vs. USD, EUR vs. European stocks and so on.

To make this more complicated: The dependencies between trading instruments can change. So you can see: This is too complex to manage, especially for a beginner. The only solution is to focus.

Becoming an expert in just one niche

If you focus on a niche, you have an additional edge. You get a much deeper knowledge and experience. With experience you can develop something like intuition.

For me intuition is nothing more than deep knowledge and experience combined. You can apply it without active thinkings. It is engraved in the structure of your brain. It is engraved so deeply that it influenced your feelings. You know it if you feel that something “is not correct”. That only means that you saw the same situation a thousand times before and now your brain sends you a signal.

This  intuition or deep knowledge is linked to the hours of learning. If you spend 1000 hours to learn and repeat one thing you have a deeper knowledge about it. Your brain is trained and build the neural paths to handle that situation perfectly.

If you spend 1000 hours to 4 different things, you only spend 250 hours per each. That means you have less knowledge about one of the 4 things.

Now you could argue that all markets are the same, because they are based on price. Yes, that is correct. But there are small differences of the price-movement of these markets.

On a macro level all markets looks the same. But if you want to master a market, you have to look at the small differences. Remember: A master knows his area in every detail!

What does a niche looks like?

I started as a “jack of all trades”. Then I reduced more and more … I focused on only stocks, reduced my style to just one trading method, concentrate on only US stocks, sliced out the high potential/grow stocks niche, focused on mostly small- and mid-caps … This all helped me to make progress as trader.

It is funny, but the more I reduced and focus, the more progress I made!

If you look at your own trading, ask yourself: What can help me to make progress? This has a lot to do with your strengths and what you like. In the end you must do everything to increase your confidence in your trading. And if your trading method is perfectly fitted on your strengths and what you like, it increases automatically your confidence in it. Why? Because it reflects your personality.

Here an example from myself:

• I like stocks because there is a real supply and demand. You can see the volume and price-action.
• There are many sectors. So you can trade different trends inside the stock market and you can see the flow of money from one sector to another.
• You can trade stocks with a small and big account. The fees are low.
• The movements in stocks can be fast. I like that!
• There are real companies behind stocks. Especially I like technology companies with new today unknown products or services.
• I like to discover and search for stocks which matches my criteria. It is an endless “detective game”.
• You can apply screener on it and filter the markets. I have knowledge about programming. So I can apply it.
• With stocks you only trade small sizes and you can spread the risk between multiple positions.

The upper things are all embedded in my trading methods. I discovered them in the last years where I look at myself and ask me: Where are my strengths? What do I like? What do I think that markets work?

Don’t get me wrong. I am not a fundamentalist. The opposite is true! I make all my decision on price and volume. But it gives me additional confidence if a stock has an interesting story and background which is attractive to investors.

Putting it all together

The journey starts with an analysis of your current trading. If you collected data about your trading, you can take it as a starting point.

If you find out that you have a lot of different setups, trade multiple markets and make tons of trades, there is something wrong. Step back and ask yourself: What will happen if I remove something? What have my bad trades in common? What have my bad trading times in common?

In the most cases you will find out that reducing helps. If you master one thing perfectly the result is better. Think about a carpenter that creates tables. If he focus to create only one type of a table perfectly, he will make more money. Why? Because he has more knowledge about it and can produce a better quality. In addition the more experience helps to reduce the costs.

The same is true for trading:

• The more experience you have in one thing, the more you can pick the best setups and trading environment.
• You can reduce the time you spend trading because you will find the setups faster.
• The number of bad trades will be reduced dramatically.

Recommended books

Here is a small list of recommended trading books about this topic.

[amazon box=”1118273052,0132157578,0996307923″]

Der Beitrag Finding your trading niche erschien zuerst auf Trading Blog - Julian Komar.