How To Become A Consistently Profitable Trader

First let’s define what a consistently profitable trader is…

A consistently profitable trader makes money consistently

That’s about as broad and narrow as I will make it. 

Notice I didn’t say “makes money on every trade”

I leave it broad for swing traders, day traders and long term position traders

Consistently profitable could mean you have a 20-30% win rate, but you happen to make big money on the winners and cut your losers short

Or you have a high win rate, 60-75% and you only make a little bit more than you lose, but you end up profitable

A consistently profitable trader has a really good idea how much money they will harvest from trading each day month & year

A struggling trader doesn’t know if they are going to be profitable on the next 10 trades

A struggling trader doesn’t know how to size their positions

A struggling trader doesn’t know if they are having a normal drawdown or if something is broken

A struggling trader lives with that pit of despair in their gut

A struggling trader sees a big market move and instantly goes to Twitter to find out “what happened”

A struggling trader is always waiting for a presidential Tweet to save the day

Best summary of a struggling trader, they are exclusively focused on the why and when to enter but not on any other part of the business

Now that I’ve shown a few examples of consistently profitable traders and struggling traders you should be able to see yourself in there

The first step is to focus on 1 single setup on 1 asset on 1 time frame and get really good at identifying it

Then document all the different characteristics about the setup 

You can’t get good at trading if you don’t have 1 single setup that is your moneymaker, the foundation of it all

Next do not add any more complexity, focus on that single setup

Look for how long it bounces around after you enter, before heading into a winning trade

Look for how long it bounces around after you enter, before heading into a losing trade

Notice how far it can go in your direction

Notice how far it can go against you

Keep track of all the nuances you recognize

See it on 5m charts, hourly charts, daily charts

See it on different assets

See it in your sleep!

There is no reason to move on from here until you have 1 good setup 

Then you need to backtest this setup, yeah this is the actual hard part of doing your own due diligence and work

This is what most people skip, they find a good setup, they look at it over and over and they think they can just throw real money at it and be done with this hard part of not printing money everyday

Afterall, everyone on Twitter seems to be making piles of cash everyday, it’s easy

It will take >1500 MANUALLY backtested trades on that single setup for you to be on your way to becoming a good trader

You can skip this step if you like, hire a dev or write the code yourself to bypass this step and I can guarantee you won’t succeed as a trader

This is the hard work everyone talks about

This is what most people don’t do

If 99% of traders fail, and everyone is talking about the same things in the markets, why wouldn’t you try something different. 

If you do the work, and you manually backtest over 1500 trades of that single setup, you will be light years ahead of everyone else

The next step is to forward test, or paper trade the new setup, in live market conditions, on your trading platform

That step from backtest to forward testing reveals how important execution skills are

Mistakes are expensive

Slippage is expensive

Commissions are expensive

News, Market Conditions have an effect on your trading

Being hungry, tired, distracted, bored all has an effect

Paper trading to the point that you make no more than 1 mistake in 20 trades is the goal

Mistakes are:

Not entering a trade that you should take

Not taking profits where you should

Not stopping out when you should

Buying 10 contracts and not 1contract

Going long when you meant to go short

Using a limit order vs a stop order

Entering a trade that isn’t the 1 setup

Doing anything based on feel, not what you’ve tested

Trading when you are distracted

Not following your routine to get into an ideal state

Mistakes aren’t:

A losing trade (as long as it was your 1 setup)

Missing a trade because you were in a bad mental state or distracted

If you can make $1 you can make 10, 100, 1,000 and 1,000,000

But it takes a while to get there

Backtesting is literally rewiring your mind to see the market and your 1 setup

The more reps you get in with it, the more you will see it and avoid things that don’t matter

Once you have a single setup that works over time and has been backtested to have posiitive expectancy and you’ve traded to confirm you CAN do it

The next step is a business plan

With all the work you’ve done with the manual backtests you should be able to predict your business

What are you financial and life objectives?

How much will you need to have trade with to achieve this?

Get that amount of money either by building it up, borrow, partner, join a prop firm

Follow the plan

Monitor your progress

Adjust and improve as needed along the way

You can download a free copy of my Pre-Trade Checklist and get on the path of Consistent Profitability