Become a Successful Trader

March 1, 2011

38 Steps to Becoming a Successful Trader

If you feel like the road to becoming a successful trader has been a roller coaster ride of ups and downs you’re not alone. I have learned  first hand (just like most successful traders)  what it’s like to lose money to the markets, break rules, and take a profit too early, among many other trading mistakes.

The more I read and talk with other traders and investors (both in the stock market and real estate markets) I’ve found that all these skills are fundamental in becoming successful in most any profession.

This list of 38 steps to becoming a successful trader is pulled from The Way to Trade by John Piper, also  published in Commodity Futures Trading Club News. I’ve found the steps easy to relate to along my trading journey and kept me from stopping 3 feet from gold.

Where are you on the list?

1. We accumulate trading information – buying books, going to seminars and researching.

2. We begin to trade with our ‘new’ knowledge.

3. We consistently ‘donate’ and then realize we may need more knowledge or information.

4. We accumulate more information.

5. We switch the commodities we are currently following.

6. We go back into the market and trade with our ‘updated’ knowledge.

7. We get ‘beat up’ again and begin to lose some of our confidence. Fear starts setting in.

8. We start to listen to ‘outside news’ & other traders.

9. We go back into the market and continue to donate.

10. We switch commodities again.

11. We search for more trading information.

12. We go back into the market and continue to donate.

13. We get ‘overconfident’ & market humbles us.

14. We start to understand that trading success fully is going to take more time and more knowledge then we anticipated.

Many Traders Will Give up at this Point as they Realize Work is Involved

15. We get serious and start concentrating on learning a ‘real’ methodology.

16. We trade our methodology with some success, but realize that something is missing.

17. We begin to understand the need for having rules to apply our methodology.

18. We take a sabbatical from trading to develop and research our trading rules.

19. We start trading again, this time with rules and find some success, but overall we still hesitate when it comes time to execute. We start trading again, this time with rules and find some success, but overall we still hesitate when it comes time to execute.

20. We add, subtract and modify rules as we see a need to be more proficient with our rules.

21. We go back into the market and continue to donate. We go back into the market and continue to donate.

22. We start to take responsibility for our trading results as we understand that our success is in us, not the trade methodology.

23. We continue to trade and become more proficient with our methodology and our rules.

24. As we trade we still have a tendency to violate our rules and our results are erratic.

25. We know we are close.

26. We go back and research our rules.

27. We build the confidence in our rules and go back into the market and trade.

28. Our trading results are getting better, but we are still hesitating in executing our rules.

29. We now see the importance of following our rules as we see the results of our trades when we don’t follow them.

30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better.

31. We continue to trade and the market teaches us more and more about ourselves.

32. We master our methodology and trading rules.

33. We begin to consistently make money. We begin to consistently make money.

34. We get a little overconfident and the market humbles us.

35. We continue to learn our lessons.

36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size.

37. We are making more money then we ever dreamed to be possible.

38. We go on with our lives and accomplish many of the goals we had always dreamed of.

My trading, I feel is currently at number 36. I continue to learn my lessons from the market, but allow my system to direct my trading. There is no way to eliminate losing trades, but from a statistical standpoint letting the system work has proved to be consistently profitable. There is always room for improvement and I am always learning new things about the market and myself. Trader Jesse Livermore said it best,”A man may beat a stock or a group at a certain time, but no man living can beat the stock market.” Remain forever humble to the markets.

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About Tim Racette
Tim Racette is a day trader of 15+ years in the E-mini futures and swing trader of stocks. Mountain biker, lover of the outdoors, and explorer. Tim is an ASU Sun Devil and a Chicagoland Native now living in sunny Scottsdale, AZ.
  1. Mr. Racette,
    I really don’t know how to start this email, here goes.
    I am new to trading, I’m on my second year of using demo’s to scalp the e mini.
    I read the 38 steps, and wow, is it spot on! However, when I found out I wanted to be a scalp trader for the e mini,I dove right in trying to find a school, that would teach trading. There isn’t any to my knowledge, just a bunch of “traders” selling their methodology, for lots of money, which as a new trader, I don’t have.
    I’ve read several books, that have taught me what I know now.
    Can you direct me, to some very specific books, or a class that you are familiar with, that will help me build a successful trading plan? I’m doing about 60-70% success on the demo’s but need a mentor.I’m within driving distance of chicago, or other area, where trading goes on.
    It’s hard to find people that will help a person in this field, that really has something successful to give, and hasn’t lost the feeling to know what it feels like to be new.I work my full time job, and don’t have the time I would like to dedicate to trading, but I still make time, its my passion.I truely hope to hear from you in the future.
    I wish you the best of luck, in all your endevors.
    Bryan Carley- of Michigan

    • That’s great Bryan, and you’re right most new traders spend their time bouncing back and forth between different strategies thinking that’s what will make them successful. Really it comes form developing the right mindset. For that reason I always direct people to Trading in the Zone by Mark Douglas and Mastering the Trade by John Carter. There’s a lot to be said for keeping the system itself simple and simply learning to remove yourself from the emotional attachment you feel to a trade allowing yourself to feel the same before, during, and after your trade occurs. A clear objective mind is what I feel keep most traders from being successful. Sounds like you’re well on your way.

  2. I’m at 36. Now what?

    • I think there’s always a constant strive for increased efficiency, that will never change. The more trade setups I take the more data I have to determine if there are other small tweaks I can make. In essence it becomes a game of, Jenga, what can I take away while still preserving the core. Aside from managing more $ or OPM as a means of growing a successful trader of 25+ years will still tell you he/she is always learning. Congratulations Gigi on your success thus far and to your continued success in the future.

  3. i am ultrad thrilled to have found this website where every body understand that trading is internal to the persons skills. looking forward to communicate with all traders with similar mindset

  4. I’m just finished donating , a lot:)

    I think I’m at 21–I need to skip ahead..

  5. Hi Tim,

    did you suffer big draw downs through this learning period? i just wonder how traders with small capital i.e $20,000 survive long enough to get through the period of ‘donating’ did you ever have to re invest in to your account?

    • Luckily, I learned about using stops and keeping my position size small early on in my trading career so I never did suffer the account “blowup.” Limiting myself to 2 full stop outs on the day also helped to limit my downside as one or two BIG losing days can erase weeks of profits.

      Keep your position size small and earn your way to trade larger size, don’t rush it.

  6. tim i wonder at what point do you determine if the market has changed direction or behavior where you might switch systems. i mean as Dr van tharp says there needs to be a different system for different markets. do you switch systems or modify existing one?? do u ever override your system??

    • That’s a great point Rufus. I don’t think we’ve seen a market condition which would validate changing systems. Sometimes there are lulls or slow periods where setups are less prevalent, but that just calls for being patient and waiting for your setups to arise. Riding the same system through the cycles is important, but I also keep detailed records and if the markets show signs of substantial change then you have to adapt.

  7. Very well summarized….and I was laughing to myself when reading some of the points…………I am @ number “26. We know we are close.”

  8. I am at 32. It is always good to look back and review where you are with your goals.

  9. Tim, I am fast becoming a big fan of you, your teaching style and your methods. As I am studying, I am kinda surprised that no one so far has pointed out that there are two #29s.

    Was that typo in the original newsletter too?

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