Double Your Trading Success with These Two Simple Rules 🏆
What would happen if you could go from struggling to profitable in your trading with just two simple rules that could shift the odds in your favor?
I found these trading rules a couple years after I started trading. I had lost all my money twice and realized that while I had learned about entry patterns, I hadn’t learned anything about risk control. So, I reorganized all the random information that I had picked up over the years and put it in the order that I wish I had learned it.
Now, I want to help new traders establish a good foundation that will help ensure that they don’t make the same mistakes I did. You don’t need to lose all your money to learn these lessons. You can learn from observing my mistakes, and I’m happy to share them even though I paid a lot for them.
These rules have provided some of our more experienced students with a flash of insight that immediately improved their trading results. Others, like myself, need a bit of study to build beliefs around this profound but subtle shift. If you’re new to trading, then learning this approach at the start will definitely improve your odds of success.
Before you consider placing your next speculative trade, you must be able to repeat these two key rules from memory out loud without reading them. These two rules are simple to memorize and simple to state, but they have profound implications for your trading, no matter what your trading methodology is. These two rules can shift the odds in a game that’s normally stacked against you if you’re serious about making money in any markets.
Learn this before you trade, think about it, and practice it just like a pilot learns and practices simulations before they fly for real. Profitable traders share common, learned habits. They generally have common methods, common standards, and common rules that they all abide by, even if they’re wrong seventy percent of the time and right only thirty percent of the time.
If you’ve been trading cryptos and you’re making 60 correct calls but still struggling to make profits, consider what would happen if you applied these two rules to your previous trades. When I first reveal Rule Number One and Rule Number Two, they may appear overly simplistic, but before I do that, I want to uncover the subtle elements to these rules and consider the consequences to your trading over a long period of time.
I hope you come to understand the profound impact that this approach can have on your trading and any other risky thing that you’re doing. No matter what kind of risk you’re taking, you will want to incorporate Rule Number One and Rule Number Two to help protect yourself against the negative consequences of the risk and to make the positive results even bigger. You can use them for setting goals, correcting missteps quickly, and boosting the success of any of your endeavors.
Once you see how the effects of Rule Number One and Rule Number Two work together, they will naturally become part of all of your trading. By practicing these two rules with micro investing to start, you can build habits and wisdom that will help you gain similar mastery over larger trades, as well as growing your micro investments in crypto, which can be a lot of fun. Dealing with money should be fun, and this is a great place to learn and practice these successful habits with money while correcting common trading mistakes.
“I was trying leveraged trading this week on gold and silver, and I noticed that I was really anxious when I was at a loss and I would get out very quickly if I was at a profit.” This is a wonderful example of natural human emotion, and it’s the reason that we want to start off small when we’re learning to trade with no leverage at the beginning.
It’s part of the work that our money is going to be doing on our behalf. We must change our thinking about the difficulties of a small loss and instead start with the perspective that small loss is actually protecting us against the nasty things that the market can do. Those who lose the most will be the biggest winners in the end. Now, this takes some study, some repetition, and some practice. Like learning anything, it will start out difficult and soon get easier, and with practice, it will soon become second nature and almost effortless.
Our premium community of creators refers to these two rules all the time. Let’s review a couple examples in order to appreciate the profound implications of what these rules can bring to your trading strategies. Behavior modification is without doubt the key to trading success. It starts with how we think, and yet we also need to change our beliefs before we actually change the actions that we’re going to take.
We must be very clear about the trading situations that we are in control of and the situations over which we have no control. I offer these lessons that I’ve learned and that I’m practicing as guidance, but it is your own determination that will make you a success. I can share the knowledge, but it’s your effort to make these rules into a belief and then a habit. These two rules will be responsible for protecting your assets, and they will also keep you in the game forever. It can be very costly to make trading mistakes. I’m happy to share my mistakes if they will help shorten your road to success.
First, in your trading career, you’ll notice that the markets go back and forth without going anywhere most of the time. Second, you’ll notice that you never control the market, but only your position. You can stop your position whenever you want, and I want to drill that into your mind. You can stop the market’s effect on your equity whenever you want, and I want to drill that into your mind.
The fact is, I had not taken the time to consider what a big move could do to my trading account. You may hear the cliche that the big money is on the surprise side, but what that really means is that the big losers are on the familiar side or on the expected side of the trade. In the beginning, it didn’t even occur to me that I should be prepared for the possibility of a really big move against me. I was often over-positioned even though I thought I had a good protection plan, and I was mistakenly doing the work that my money should be doing.
Everything I did in my trading plan was based on estimates of how much I could take out of the market; my trades were actually designed to lose, and the worst part is that I didn’t even know that my strategy was ruining a good trading system. Many times when I thought I was smarter than the market and I kept sticking to my predictions, I ended up taking big losses in such a short period of time. Why does this happen? Mostly because I didn’t consider what would happen if I was wrong. My thoughts were always on expecting to be right. After all, why would I make a trade if I didn’t believe I was correct?
Herein lies the key to being a successful trader. I’ve learned this over and over in my trading career, and I haven’t found any guru who will tell you what I’m about to reveal in trading: If you have bad luck, it will eventually stop you from trading.
Overall, we must plan for the possibility of the trade going against us as long as it is a possibility, not just when it is likely; this is a critical point in trading correctly. This will be the surprise side of trading. Most traders only plan for the probable side, which is the side that they always consider to be the winning side.
This was the biggest mistake that I was making in my trading; instead, I had to plan for being on the losing side. Trading is not a favorable game in most circumstances, and that is what we must use as our assumption when we start.
As a good trader, we must always be in command of knowing and telling ourselves when the position is bad. The market will tell us when the position is good enough to hold. Most Traders do the opposite of what is correct by removing positions only when they’ve been proven wrong.
Consider this: Your risk exposure is much higher if you let the market prove that you are wrong rather than systematically removing positions unless the market proves the position correct. You never want to be in a position that has never been proven correct. Remove the position early if it doesn’t prove correct by waiting until the position is proven wrong. You’re asking for more slippage because everyone else will be in the same situation and will be proven wrong too.
What makes this strategy most comfortable is that you must take action without exception if the market does not prove your position correct. Many traders succumb to the “fight or flight” or “freeze” reflex and do nothing, and the market stops them out; it isn’t even their decision to get out of the market at all; it is the market’s decision. However, this approach will increase your losses and stress; instead, consider thinking that when your position is correct, you have nothing to do rather than doing nothing when the position is incorrect.
Let’s consider the kind of thinking that might keep you in a losing position too long. Who’s to say that a position that was not proven correct might turn from a bad position into a correct position? Well, if we fear being wrong when we get out of the trade and we are worried the market will show us that we should have stayed in the position, then we have the habit of not taking early losses when they are small. It always becomes more difficult to take a loss as it gets larger, and it’s those occasional big losses that take away the money we had working on our behalf. It demoralizes us and it can take us out of trading.
Our first job, our primary responsibility, is practicing the swiftness needed to keep your losses small and as quick as possible. It won’t always prove correct, but you’ll stay in the game this way and avoid the big losses.
I didn’t know what my choices were when it came to making assumptions about what is possible in trading. I started with the assumption that it’s my job to make money in trading, but this is totally backwards. My job is to take quick and small losses. I now know to assume that my position is wrong until or unless the market proves it correct. I now know my job is to determine when I’m wrong, and that wraps up rule number one.
On the other hand, you will get correct positions. You may have heard the adage, “cut your losses and hold your winners,” but this only addresses the need to keep your losses small and misses out on a second. Factors we’ll discuss tomorrow to help you make consistent profits When your trade is correct, you must be larger at that time, which necessitates a rule or strategy designed around adding to winners in this unfavorable game to ensure that you come out ahead in the long run.
I’m very happy to have you along for this thread. We’ll go over rule number one a lot more as we go through the trading plan itself, and in the next one, I’ll reveal rule number two.
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