Once you’ve got the hang of trading, you’ll need to move forward, develop and adapt your skills to the markets. This involves setting realistic goals, whether based on profit-and-loss (PnL) targets or process points.
Whatever edge you currently have against other market participants, it could disappear, and trading opportunities could dry up. Here are some tips to help you develop as a trader and stay on top of the market as conditions change.
PnL-oriented vs. process-oriented
As a trader, you should set either PnL-oriented or process-oriented goals. PnL goals are based on your profits, in that you set a goal that you want to make in a month or a year, as well as the amount you’re willing to lose in that time during a drawdown. Successful traders keep this goal in mind at all times.
For example, one trader might look to only drawdown a maximum of $1,000 before stopping trading and heading back to the drawing board for a while.
On the other hand, there are process-oriented goals. This involves looking to develop a strategy or game plan to potentially maximize your batting average and PnL. With process-oriented goals, you stick to your game plan and the setups that you’ve witnessed as having the highest win rates.
Your edge trades might not be around for long; if you don’t evolve and develop other tools and techniques, you’re stuck if and when your edge trades stop working. Hone your process, look for additional indicators, areas and techniques that can give you an additional advantage and you will increase your chances of developing into a successful trader.
The bottom line
Evolving as a trader takes time. Set realistic goals, consider starting with process-oriented targets before focusing solely on profit-and-loss measures. Remain disciplined with your strategies and hungry to learn new and different techniques and you might be able to achieve your potential to be a consistently-profitable trader.
Jason Bond runs JasonBondTraining.com and is a swing trader of small-cap stocks.
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