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In today’s episode, I’ll share with you this ONE thing winning traders do, that losing traders don’t.
So tune in now to find out…
Resources
How to Overcome Your Fears in Trading?
How to Backtest a Trading Strategy Even if You Don’t Know Coding
How to be a Profitable Trader Within the Next 180 Days (Even if You’re New to Trading)
Trading Psychology: 6 Practical Tips to Master Your Mind and Money
Transcripts
Hey, hey, what’s up my friend?
In today’s episode, I want to discuss the one thing that profitable traders do, that losing traders don’t.
So what’s this one thing?
Based on my last 7, 8 years of mentoring traders, this one thing differentiates the two traders:
Validating your trading strategy
Winning traders validate their trading strategy, and this is something that losing traders don’t.
But what is validating your trading strategy?
Validating means that you’ve done the work, you’ve backtested a strategy, you’ve forward-tested it, and you know that the trading strategy actually yields a positive expectancy, makes money in the long run and actually has an edge in the markets.
That is what I mean by validating your trading strategy. This is what winning traders do.
They don’t risk a single dollar until they know that they’re trading something that actually works.
Whereas if you look at losing traders, they just go to forums or read some books that say buy when the price breaks out of the 50-day high and have 50 pips target profit, and they would just take it at face value.
They think that just because someone wrote a book, that person is credible. So they’ll just take that strategy at face value and they trade it on their live account. Then they wonder why they lose money in the long run.
That’s because they’ve not validated their trading strategy.
When you’ve validated your trading strategy, there are many benefits that come along with it.
Benefit #1: You’ll overcome the fear of losing
When you trade a strategy that’s validated and backtested over the last 20 years, covering:
- Uptrend and downtrend
- Low and high volatility environment
And still makes money despite different market regimes, then you’ll be confident that even as the market changes, that strategy is still likely to make money in the long run.
You’ll have the fear of losing still. But the fear of losing is greatly minimized because you know the strategy has survived in different market conditions.
And that’s not all…
Benefit #2: You’ll overcome the fear of the unknown
Imagine if you use a trading strategy that’s not validated. You’ll always wonder:
“What if the strategy stops working?”
“What if the strategy doesn’t work at all, in the first place?”
“What if this trading strategy is a losing strategy?”
You’ll have all these damn thoughts in your head – the fear of the unknown. But if you validated a strategy and know that it works, these thoughts will naturally melt away.
You’ll look through the historical backtesting and realize the strategy has worked in the 2008 financial crisis and the during the dotcom bubble.
So right now, although it may not be working too well, but this is part and parcel of the drawdown and it’s likely to continue working again in the future.
The fear of the unknown is greatly minimized when you’re trading a strategy that’s validated.
Next…
Benefit #3: You’ll have the conviction to trade
When you’re trading a strategy that’s validated, you’ll have the conviction to trade it.
If you know that every time you toss a coin, it comes up heads, you win $10 and every time it comes up tails, you lose $5, will you be convinced to toss that coin for the next 100, 200 times?
I’m sure you will. Because the coin toss yields you a positive expectancy. It’s the same for trading. You’ll have the conviction to trade that system if you knew that you have a positive expectancy, if you knew that you have an edge in the markets.
It’s a no-brainer.
Moving on…
Benefit #4: You won’t get swayed by noise in the market
When you trade a strategy that’s validated, you won’t get swayed by noise or news in the market.
You wouldn’t be having this “chasing a shiny object syndrome”. Because you know that you already have something that works.
Why would you deviate from it?
When you have something that works, you’ll tend to be more focused, you’d be more disciplined and tuned out from the noise in the markets.
And finally…
Benefit #5: You’ll become a more consistent trader
When you are convinced of your trading strategy, you’re not swayed by the noise, and you don’t have much trading psychology issues at the back of your head, naturally you’ll become more consistent in your trading.
You’ll become a more consistent trader.
That’s something that will happen naturally. It all starts with validating your trading strategy and doing the work to backtest and forward test, to find out whether something really works or not, before you trade it.
That’s the biggest difference between winning and losing traders.
Losing traders just want to be spoon-fed:
“Hey Rayner, what’s the best moving average parameters I should use?”
“Should I use a 20 or 27-period moving average?”
For winning traders, they’ll do the work. They’ll find out whether something works or not and they’ll just go for it.
So this is the one thing, that separates winning traders from losing traders.
Do the work, validate your trading system. And I can assure you that your trading will get much better from there.
With that said, I’ve come towards the end of today’s video and I’ll talk to you soon.