For The Retail Trader - A Basic Road Map To Profitable Trading

For The Simple Retail Trader - A Basic Road Map To Profitable Trading..

The purpose is to supply a basic actionable framework for profitable trading via a series of (hopefully) super short posts..

We'll attempt unpacking the issue, by deconstructing the subject into 3 simplistic elements -

1. Capital
2. Perspectives
3. Execution

Capital - WHY

I believe this is the biggest problem you'll need to solve as a Trader.

1. Bottom line, You need money in order to have the ability to take trades..

2. The ideal situation is for you to have access to an amount of capital well beyond your living costs.. (personally I think at least 100X of your monthly living costs should be the ideal personal account capital amount - i.e. if 1000 GBP were my costs in a month, 100K GBP would be a reasonable starting size)

3. You need the good capital size because almost certainly, there will be losses. Good capitalization supports the probabilities of your success; furnishes the means not to fear your losses, provided you're being reasonable with trade size; while giving yourself the room to make meaningful gains towards capital appreciation as well as catering for living costs.

Imagine Traders A & B. Both have costs of 1000 a month. Both take a $2000 loss on the day. A manages 100K. B manages 10K. Enough said.

There's also the case for profits (i.e. 2% of 10K vs 2% of 100K), but I feel that's self-evident. I wouldn't need to state it.

Capital - HOW

There are multiple solutions to the question..this will be no exhaustive list, even from a retail position. Some paths are more hassle than others, use what you have.

1. Personal savings.

2. Partnerships. Ask friends and family for help. Assuming living costs of 1K, Build your 100K.

3A. Open a micro live account, rack up trading stats for at least a year; demonstrating profitability, with an acceptable DD (20% or less); and a return of at least 50% per annum. Approach pro-investors with your track record. Offline, your bank account manager might know where you should find these individuals. Online, ask around on Forex Factory. Ask Google. There are a number of capital allocators on the web nowadays.

3B. Resell the track record of a profitable Trader, with the metrics listed above or better; provided you have access to the Trader's signals.

4. Purchase the right to trade that capital size or better from an online prop firm. In most cases, for 100K you're given 10K in downside; so you're actually trading a hyper-leveraged 10K account. This means you could rack up 2,000 in losses; and not get as concerned as Trader B, whom we mentioned prior, would be..because you wouldn't have suffered as much a reduction in buying power!

Just to drum this afresh, its best you don't start under capitalized..

Capital DONE! Up next, Perspectives..

Perspectives -

There are a million ways to make money from the markets doing very very different things. We see this manifestly in the famed book "Market Wizards"; one long term successful Trader does the exact opposite of the other long term successful Trader! Independent of (almost all) method, I believe there is a more significant variable which determines long term successful outcomes; it is that of PERSPECTIVE - how you understand the markets and trading as a whole!

We will attempt to build a healthy Market Perspective from first principles -

1. The Concept of Limitless Chances -

Realize that good opportunities, that you will be sure to recognize, will always ABOUND! They are not scarce. You are sure to see these time and time and time again.

When you first start off, your paradigm very likely might take the antithetical shape - You'll be tempted to think the one good opportunity you see before you at the present time is the last you'll see for a LOOONG time. You'll be induced to view things (i.e. good signals) from a perspective of scarcity. DONT BE FOOLED! Good signals that fit your criteria (if you're trading systematically), or give you that SOLID feeling (if you're trading by discretion) will ABOUND! The markets will always give you another lovely opportunity, that you will be sure to recognize, tomorrow.

Today its the FED & Russia; Yesterday it was COVID; Before that it was Market-Loving-Trumpian-Economics. Opportunities are essentially limitless!

2. Controlled Leverage -

If you don't recognize the idea of limitless opportunities; you will jack up on your leverage, E-V-E-R-Y! S-I-N-G-L-E!! T-I-M-E!!! You will not respect your capital size limits, as you load up to the hilt trying to max out on this single GREAT opportunity...and unfortunately, there are nasty consequences for not controlling the use of leverage..

The general gist of the thread seems to stick to the old-fashioned claim that only the rich can get rich. To be honest, I can hardly imagine a person who, having little wealth, saves money in order to lose it in trading without any serious knowledge. People go into trading for extra profit, and only if you turn out to be incredibly good, this can promise you something in the future. From here, everyone has their own needs, and carrying it through the capitalization point is rather one-sided, and most importantly, for whom? Who has capital and wants to join the investment, will not sit on the forum, no?

Prop Firms offer trading capital. i trade with a 7 figure account that i earned with my trading skills

The accumulation of capital is never easy, time is the only criterion for testing。

which prop firm do you trade for ??/

you comment made no sense plus capital is easy to come by nowadays

What does "criterion" mean? Do you mean 'criteria'?

Criterion is the singular. Criteria is the plural.

To Readers -

My apologies the thread is clambering along really slow, "life" is not allowing for a quicker pace..

3. A Theory of CERTAIN but CONTROLLED Losses -

If we take it that losses are unavoidable, but good opportunities ABOUND; we are less inclined to marry losing positions...the resultant effect is that we are likely to keep losses small, especially if we are properly capitalized..

4. Consistent Profit Taking -

If we believe good opportunities ABOUND, we can resist greed. Hence it should be valuable to work out ahead of time reasonable metrics or methods (dependent on trading strategy/execution) for profit-taking and stick to them. Good opportunities ABOUND..but they are useless if we don't actually take profits. Trading is about getting paid! I mean, has anyone ever been upset at the money they made from their fat finger trade?

A Healthy Perspectives Equation:

SIGNAL ABUNDANCE MENTALITY +
CONTROLLED LEVERAGE +
CONTROLLED LOSSES +
PRE-PLANNED PROFIT-TAKING SCHEMATIC =

HIGH PROBABILITY LONG TERM TRADING SUCCESS

Perspectives DONE! Up next, Execution.. (Strategy & Tools)