Not a day goes by that a new subscriber without me receiving this question:
Can I grow my small account by applying Total Alpha strategies?
And while I appreciate the question…
Allow me to tell you what really matters…
You see, it’s not the size of your account, level of skill, or how many chart patterns you know…all of that may help, but it isn’t the secret sauce.
None of that means squat if you can’t manage risk, define your core strategy, and have a process to review your trades.
Some traders have one or two of these intangibles.
Few have all three.
I never would have amassed this kind of wealth without mastering them.
Today I’m going to discuss how you can develop these three principles.
So you too, can take your trading to the next level.
Let me start by stating the obvious – when you run out of money, you’re done trading.
It sounds silly. Yet, if you’ve ever found yourself in a trade that could cripple your account, then you’re as guilty as we all are.
Risk management defines how much we place on a trade and how often.
Remember when I said account size doesn’t matter? This is why.
Think of each trade in terms of percentages. Whether I have $100 or $100,000, if I’m risking 1% on a setup with a 1 to 1 risk/reward, then the relative outcomes are the same.
Yes, there are some limitations in certain markets like options based on how much it costs to buy one contract. However, you can find ways around that by adjusting your strategy.
For example, I prefer to buy in-the-money option contracts because they have less extrinsic value. However, I could take a similar trade by buying out-of-the-money options that are much cheaper. Then I’d go further out with expirations to make sure time decay doesn’t eat away at the position.
Will I make as much money? No. But stacking up wins is what it’s all about.
That’s why most traders fail there first few go arounds. They try to learn and trade everything. What they don’t realize is you only need to be good at one thing to make money.
One setup is all you need
Doctors don’t try to fly planes. Carpenters aren’t cut out for surgery. And hair stylists don’t typically build houses. But each of them are really good at their chosen field.
Why is it that traders feel the need to be everything at the same time?
Nathan Bear is a perfect example of someone who does one thing really darn well. He takes his TPS setup that looks just like this and trades it over and over.
TSLA Hourly Chart
He couldn’t care less about macroeconomics, investing…none of that matters to him. This guy took $38,000 and turned it onto over $2,000,000 in two years doing one freaking thing.
So, the next time you want to learn a new setup or method of trading, ask yourself whether you actually spent time with the old one? Did you give it a fair shake?
Maybe the reason you (and I did as well) keep blowing up your account is more about you than the charts.
To make money outside, look inside
As traders, we constantly reflect on the trades. Rarely, do we actually look at ourselves and ask what we can do to improve.
The funny thing is, you can’t control the charts. You can control yourself and your actions.
Making profits over the long-haul comes down to repeatability and reproducibility. You need to be able to find trades over and over and make the correct decisions every time (or most of the time).
None of us can get there without first working on ourselves. That breaks into three core concepts: stability, structure, and self-reflection.
Stability doesn’t mean that you have an unbreakable will that could withstand POW torture. It means you perform at a level that’s reliably high.
Most of us achieve that not by getting there once and then never looking back. It’s more like a leaky faucet – requiring constant maintenance and care.
Structure is the programmed schedule that gives you control over yourself and your trading. It’s the reason many traders go about their days in the same way.
They perform the same analysis at the same times, not because they have to, but because it makes them better.
But you can’t build a framework and schedule without understanding how and the best ways to create one.
That’s where self-reflection comes in.
- Ask yourself:
- Am I better focusing on one small task at a time?
- Do I have the patience to wait days without taking a trade (really days)?
- How mad do you get when a trade goes against you?
- Do you know your weaknesses and strengths?
You can think of yourself as the SWOT analysis you did back in school. Look at yourself as a business. Pretend you’re a consultant.
Then come up with a recommended schedule and structure to not just trade each day, but ensure you haven’t lost anything as well as continuously move forward.
Doctors do this all the time. They attend seminars and complete coursework to keep up with the latest advances and techniques in medicine.
Quite often, they’ll bring on residents and teach them the ‘ropes’. That very act helps them review the basic skills that provide the foundation for their careers.
So, the next time you think about spending an hour looking through charts, take some time and consider where you stand as a trader.
Are you where you want to be? Where have you come from? How do you get to that next level?
About that next level
One way to cut the learning curve is by tagging along with someone who knows the ropes. I created Total Alpha so that everyone could not only learn to trade the market but cultivate their own strategies.
See for yourself.