Author Bio

I was recently asked by a trader who said he’s been trading for about a year now about taking his trading to the next level. He said he found a system that suits his personality and that although he’s made a few mistakes, he’s been able to be profitable for the past three months with a 5%-10% monthly rate of return.  As I’m sure you realize, three months isn’t that long and nobody can tell the future. He wanted to know about maintaining his performance and moving up to the next rung on the latter, wondering about the comparison to athletes in terms of how much time they spend training.

The first thing I want to point out here is that he’s found a trading system suitable to his personality. This is key. It’s probably the one thing new traders don’t understand about being able to reach a level of sustainable performance in the markets. This is why they end up bouncing around from system to system because they don’t see the performance they expect, oftentimes wasting a ton of money along the way. If you’re system doesn’t fit you, then at some point the conflicts are going to create problems. It might mean ignoring trading signals or taking trades that haven’t been signals. It may mean putting on trades that are too big or too small.

Trader Training

Now, as for the comparison of trading to athletics, it’s certainly often made. I’ve done so myself. There are some differences in this context, however. Much of what athletes do with their constant training is to maintain or improve their physical attributes. Clearly, that isn’t something traders really need to worry about. It’s not like clicking the mouse is physically demanding, after all. The other side of things in terms of working to develop new skills and/or refine existing ones is relevant, though.

Taking the physical element aside, athletes work a lot on getting better at what they do in a few different ways. The most obvious is training – practice repetition. I don’t think I’m going too far out on a limb to say that someone with a solid system like the trader in question here probably doesn’t need to practice using his system. What he may need, though, is the other side of what athletes do for development. That includes things like reviewing their performance on video and getting input from coaches. Performance review is definitely something which can help traders.

An important part of any trader’s development is monitoring their performance on an on-going basis. At its most basic level that means making sure you’re doing what you’re supposed to be doing according to your trading plan. If not, then you know you need to work on that as a first priority.

Another aspect to reviewing one’s performance is to look at how their system is doing in terms of expectations. Is the system making the trades it’s supposed to be making and/or avoiding the ones it isn’t supposed to make? If not, then the question of why needs to be addressed.

This is not to say that skill development isn’t a part of trader development. Experience will certainly make you a smarter trader over time, but there are other things which can be done along the way. Learning new methods of analysis can be part of that equation. Doing trading system research is another possible path, depending on your needs and interests. It’s almost always worth at least exploring ways you can improve things like risk management and market analysis.

Stepping Your Trading Up

As for taking it to the “next level” is, I’m inclined to lean against focusing on the rate of return itself. More important for just about everyone is making incremental improvements to following their system, avoiding errors, and the other sorts of things mentioned above. That will often translate into higher returns, but returns aren’t necessarily the most important consideration. Sometimes better trading means lower drawdowns and/or a smoother equity line overall.

In fact, taking it to the next level can mean a number of things which don’t relate to rates of return at all. It could mean trading with a large account. It could mean expanding the number of securities and/or markets you trade. It could be shifting to more advanced trading strategies, like employing options. The bottom line is that the next level is what you decide.

Suggestion

The advice I would provide in a situation like this one is three-fold. First, three months really isn’t enough to judge your performance quite yet. A bit more time should probably be given to have really good measure of things. Second, do regular performance reviews of both personal trading actions and how the system has done relative to what would be expected. Make any adjustments required. Lastly, once any performance issues have been cleared up and sufficient time has passed to properly judge things, if things are comfortable I would consider reevaluating your investment level.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.