In today’s episode, we discuss why boring is actually good when it comes to trading!
This statement might be a bit off-putting – especially for traders just beginning their journey because how can trading not be exciting when you can be making life-changing money?
While you certainly can make great money in this industry, the reality is that if you are in this business for excitement, you will eventually blow out your account.
Real trading is all about earning risk-adjusted returns which is dull and unexciting – the real fun part is getting to spend the gains and your time however you like!
You have to be willing to take the boring, systematic approach to your trading goals. and we’ll explain exactly how to do that today!
To put it simply – a trader’s job is to make risk-adjusted returns.
For those unfamiliar with what this means, let’s break it down for you:
The risk-adjusted return measures the profit your investment has made relative to the amount of risk the investment has represented throughout a given period of time.
This is an important concept to understand because many new traders believe that the final P/L is the only important measurement of their “success” and they strive to achieve outsized returns without focusing on risk management.
Profitable trading is both effortless and boring – if you find yourself stressing, feeling excited, and/or frustrated, your mental capital will get drained a lot faster and your performance is likely to suffer.
In order to achieve risk-adjusted returns, a trader must find low-risk, high probability trades that offer favorable risk v reward profiles and execute only on those setups – if you are doing things right, you should be doing nothing MOST of the time.
Money is attracted to traders that can control themselves and remain disciplined regardless of market conditions.
Sounds pretty straightforward right? So why do so many fail at reaching consistency then? Because good trading requires a lot of sitting on your hands and we, as human beings, are not the most patient especially when money is involved.
How to Make Trading Boring?
The simple answer: Follow a consistent routine!
Find a trading strategy that resonates with you and take the same trades over and over again
- Know exactly what you are looking for and what you consider to be a low-risk, high-probability trading setups
- Map out your levels and identify your if-then scenarios before the market opens
- Once the session starts, you are only looking for the market to come into your level and meet your setup criteria
- Only take a trade when all of your criteria are met
- Think like a hedge fund manager trading millions of dollars; would you still want to take that trade? If not, you should pass on it.
Control Your Risk Instead of Looking For Huge Gains
- A profitable traders main job is to make risk-adjusted returns
- In order to do this, you must know exactly how much you will be risking on any given trade
- Understand that one single trade does not mean much over the course of a large set of trades
Post Trade Review
- Once the session is over, review your trades and grade how well or poorly you followed your process
- Write down 1-3 learnings lessons and takeaways from the session
- Continue to build confidence in your process and your profits will
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- Catch up with our earlier episodes: Mind Over Markets Podcast