Let’s face it, we’ve all dreamt of becoming ultra-successful.
The good news is that this dream isn’t as far-fetched as it may seem in the trading world.
In fact, the blueprint to amassing a small fortune in trading can be broken down into a simple equation.
Here it is:
1,000 trades with an average profit of $1,000 each.
But how do we ensure a profit margin of $1,000 per trade?
And what about the inevitable losses that come with the territory?
You’ve got questions…and I’ve got the answers…
So let’s dive in.
Table of Contents
The Rule of Averages
First and foremost, it’s crucial to grasp this fundamental rule of profitable trading:
Your average gains must be greater than your average losses.
It’s an elementary concept, yet one of the most critical.
Throughout my trading career, I’ve maintained an average profit of around $1,600 per trade while limiting my average loss to approximately $400.
This substantial gap between potential gains and losses forms the bedrock of a thriving trading portfolio.
The Win Rate
Your trading strategy’s success also hinges on maintaining a high win rate. My win rate stands at around 76.6%.
Yes, losses do occur, but they’re not the enemy – the real adversary is uncontrolled losses.
For example, that boneheaded trade in EFTR will most likely take a few weeks or even longer to come back from.
As traders, our focus shouldn’t be on dodging losses but rather on managing them effectively.
Cutting Losses Quickly
How do we manage these losses?
The solution is simple – don’t let your losses surpass an average of $100- $200.
This is the foundation of the ‘Cutting Losses Quickly’ (CLQ) strategy.
This tactic involves establishing a pre-set price point at which you’re ready to ‘stop out’ or sell, effectively curbing any significant damage to your portfolio from a single trade.
I don’t use an actual stop loss because of the nature of the stocks I trade…they’re just super volatile.
And it’s easy to get wanked around and whipsawed. That’s why I prefer to use a mental stop instead.
Nonetheless, the CLQ strategy has been instrumental in creating over 30 millionaire students from my trading program.
And if it wasn’t for this rule/strategy…I wouldn’t be here after 20-plus years.
You’re likely to experience trades that buck the trend. In fact, I had one last Friday that cost me well over $27,000 in the ticker symbol EFTR.
Now, I’m starting the month of June in a hole…
And while it sucks…I always have the big picture in mind.
Remember, our goal of hitting the $1 million mark isn’t about individual wins or losses but averages.
When repeated over time, these averages guide you to your million-dollar milestone.
Patience and Refinement
Becoming a millionaire trader doesn’t happen at the snap of a finger.
It’s a journey that requires patience and relentless work on refining and optimizing your trading process.
Even after 20 years, I’m testing new ideas and strategies.
As the market environments keep changing –– your strategies also need to evolve.
Adaptation is Key
The ability to adapt is a crucial aspect of successful trading. For instance, the most profitable trading window right now is the first hour of the day.
On the flip side, midday sessions have been pretty BLAH.
The crux of the matter is this: focus on what works best for you and be agile enough to adapt to the changing market conditions.
The Path to Millionaire Trading
Becoming a millionaire trader isn’t about quick wins, it’s about a meticulous, dedicated, and patient pursuit. It’s about continuously striving for larger average gains, maintaining a higher win rate, and keeping a tight rein on average losses.
While challenging, this journey promises a reward worth the effort.
And if you, too, understand and commit to this journey – staying meticulous, dedicated, and patient – there’s no reason you can’t follow suit.
Now that you’ve tasted the formula…the only thing left is acquiring the education and knowledge to reach your biggest goals.