In the world of trading and financial blogs it’s easy to get overrun with useless and outright false information. Over the years I have had many brushes with the turbulent world of prop trading, so I can tell you some secrets that pros know and retail traders only wish they knew. Until now!
The following essay is part of a comprehensive series I am posting over the course of the next few weeks in an effort to drive an 800 ton mining excavator through the mountain of mind trash that is preventing you from being a successful trader.
Rule #2: Lots and lots of small trades are THE SECRET
Have you ever wondered what the accounts of the top traders look like? How many trades are they taking per month? What percentage of their account they are risking on each trade?
Before I answer that, let me tell you what they are NOT taking: Lotto Ticket Trades.
A common trap that most new traders run into is lack of progress combined with unrealistic expectations.
They see some Youtube ‘guru’ post a screenshot of a Hail Mary trade where he made 1000x on his account overnight.
Good for him (if true) but for inexperienced traders this is an easy honeytrap to fall into.
Of course what doesn’t EVER gets posted is the mountain of carnage produced by trades that risked 40% of an entire account and then blew up in their face.
Or when 2 of these types of trades blew up in a row, essentially wiping out a trader’s hard earned trading capital in short order.
That stuff doesn’t exactly go viral, does it now?
Main offenders I see all the time are trading courses promoting “Small Account SECRETS”, or promising ‘‘How to turn $50 into $20k’ overnight.
In most cases what really happens is the exact inverse: A $20k account turns into $50 almost overnight, leaving noob trader shell shocked and devoid of trading capital.
If you think I’m exaggerating head over to reddit/wallstreetbets and just start scrolling down the list. It shouldn’t take you long…
Another variation of the Lotto Ticket Trade is the ‘If I Just Had X trap’.
In the ‘If I Just Had X’ trap, a frustrated new trader might say “Hey, if i just had one week where I made 10%”.
Based on that mental conditioning the trader then takes a bunch of trades with insane amounts of risk that all end up blowing up, and of course wipe out a substantial portion of his trading account.
In Trading The Tortoise Always Beats The Hare
Would you like to know how traders at the top of their game are making 40% a month on their capital? Here is the secret:
THEY ARE MAKING TONS OF LOW RISK TRADES
That’s worth repeating a million times over, but just for good measure:
THEY ARE MAKING TONS OF LOW RISK TRADES
When I finally realized this and met the pros that were quietly crushing it, it was a game changer for my trading results.
These days I risk a maximum of 2% of my account on any trade and on average I’m making 7 trades per week. Over the course of a month that adds up to about 30 trades, plus minus.
Not one trade makes or breaks me. Wash, rinse, repeat.
That doesn’t sound like much to many but my results speak for themselves. In the world of trading the slow and steady tortoise always beats the hare.
There is a second hidden magic in taking lots of low risk trades: you’re tapping into the power of repetition.
Flexing the muscle over and over again is a time tested method of mastering anything.
If you go to the gym and workout 3 times a month, it’s going to take an eternity to see any progress.
If you workout 3 times a week, you’re going to see continued progress. Trading works the same way.
So leave the lotto tickets for the scratch off junkies and step up like the pros and make lots of low risk trades.
If there is any secret to making lots of money consistently as a trader, this is THE secret.
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LIVE cumulative P&L of all my trades over the past year can be found here.
See you on the other side.