The Secret to Winning Trading

The Real “Secret” to Becoming a Winning Trader

There are, at last count, 27,342 books, software programs, manuals, and reports that promise to supply you with “the secret” to being a winning trader. I’ve no doubt that somewhere in all that stuff (some of which, I myself have written) there are indeed some little-known secrets, tips, and trading tricks of great value, and that can definitely improve your profitability as a trader. And for that reason, I still devour everything written on trading that I can get my hands on, even though I’ve been a successful trader for over two decades. I have yet to spend $50 or $100 on a trading book or strategy that did not at least give me some little tidbit that enabled me to make back, through adding the information to my trading, ten times the cost. Make a note: Every dime you spend on educating yourself as a trader is money well-spent. I’ve even learned profitable things from buying trading systems that don’t work at all!

But the truth is that few of these materials reveal the true secret to winning trading. Let’s fix that for you, all right?

The real secret to becoming a winning, successful trader is…trading. The simple, but often overlooked, truth is that trading is like any other skill in the world, from basketball to selling insurance - you get better at it by doing it, by practicing it. And all the reading, all the computerized, optimized trading systems in the world, are, in the end, no substitute for the experience of actual trading.

After ten or twelve years of trading, you will have experiences like this: You have a trade on in the soybean market - trading has been mixed during the day, up some, down some, and it’s now hovering just one side or the other of unchanged on the day. But somehow, you know that during the final hour of trading for the day, the market is going to go higher. How do you know it? You know it because you’ve seen this pattern of market action hundreds of times before, enough times that it has ingrained itself onto your memory cells. It’s not that you have an actual conscious memory of, “Oh, the soybean market went through this exact same trading pattern on such-and-such dates in the past”. Instead, it’s a more of a subconscious thing, something that presents itself as a strong gut feeling, an intuitive thing. But it’s a very strong feeling - you really do, as much as is ever humanly possible, know what the market is going to do.

And you don’t know it because of any computerized trading system that gives you a signal, or because of any trading tip that you read somewhere - you only know it because you have watched a market trade, day in and day out, for years. If you read interviews with the master traders, you will find that they all agree on this - that no one ever becomes a “market wizard” any other way except through accumulating years of trading experience.

So, if you want to become a super-successful trader…? Get busy trading.

Trade the markets, study the markets, watch the markets even when you aren’t actively involved in them. On that last part: I am, all modesty aside, a very, very good cotton trader. I’m a better cotton trader than I am a bean trader, gold trader, or bond trader. Why? - Because I have some magical affinity with the cotton market? - Because I got my hands on some super-duper cotton trading system? No. The reason is, plain and simple, because the cotton market is the one market that I have most faithfully, consistently followed throughout all my years of trading, even when I wasn’t actively trading it. I’ve taken 6 months or a year away from watching sugar or bonds or the Swiss franc, but I have nearly always kept an eye on the cotton market. And because of that, I simply know that market better than any other - and am therefore better at trading it.

With all that in mind, here’s another secret: You can’t adequately study every market on the board, and therefore you can only really become an expert trader in a handful of markets. In fact, a number of the most successful traders are “one-market traders” - that is, they only trade one market - bonds, beans, gold, cocoa, whatever. You should select 3 or 4 markets that you want to specialize in, and stick with them - watch the action in those selected markets every trading day, regardless of whether you have a position on. In fact, if you don’t have a position on, an excellent trading exercise is to practice thinking, “If I were going to enter this market right now, which way would I position myself? Where would I place my stop? What would my profit target be?” - and then see how subsequent market action either validates or contradicts your choices. I don’t mean that you can’t ever trade other markets, but the majority of your trading should always be in your chosen markets, and you should always keep in mind when trading other markets outside your specialties that you are at a disadvantage compared to traders for whom those are their markets of specialization.

There are plenty of little secrets to be discovered along the way in your journey as a professional trader, but the big secret to trading is now, has been, and always be…trading itself. To borrow from a famous advertising slogan, “Just DO it”.

JBM

The Science of Getting Rich