How to become a better Trader

How to become a better trader? What a question, what a question. And I guess it's the question on probably 90% of traders' lips, right? So many people fail at trading. So what is the answer to becoming a better trader? How do you become a better trader? And I mean, I guess talking from experience here, I mean been trading for myself for the last 10 years. I've been through— I mean, what I'm going to show you today is exactly what I went through myself and is exactly what I teach inside my training, exactly what I tell my clients to do. And giving this a bit of a think myself, I figured that a lot of the problems here come from something that I call the knowledge paradox. A lot of traders think that more knowledge means better results, and I have found through data that this isn't quite the case. So let me just share something with you here where I can explain this in a little bit more detail. So Let me just quickly switch over to this just here. So what is the knowledge paradox? The knowledge paradox— as a trader, we have to— again, if we're starting as a newbie here, right, we are going to be starting in this area here, right? We've got absolutely no knowledge at all, and the majority of people will think that the more knowledge you get, the closer to becoming an expert you are, the better your results are going to be. However, what I have found is that this isn't necessarily true. And as you are learning to trade, you are going to get to a spot in terms of your knowledge that I call the sweet spot, right? You get to this stage just here if it's going to let me move it— where it's the sweet spot. And the problem is that you never really know when you're at the sweet spot, right? It's quite difficult to know when you're at the sweet spot, but there comes a time where you've got enough knowledge, you have got sufficient information in front of you, that the best option for you to do at this point is to just take action. Right, at this point you've got enough knowledge, you've got a set of rules in place, you've got a strategy that works, and all you need to be doing in this case is executing, right? This is when you then need to get into the markets, you need to get real-life experience, and you need to take action. But where people fall short is they can't identify this. They don't know where this sweet spot is, okay? And I guess this is why a lot of traders that sort of go solo um, tend to take a little bit longer to, to get the results that they want to get and to find that sweet spot. Because often you think that, okay, well, the more knowledge that I acquire, the more of an expert I become, the better I'm going to be able to be at trading. It's the more money I'm going to make as a trader. But what actually happens is you end up losing that edge that you have. Right, that strategy that you've built and that you've tested, that works in data, okay, that works on paper, is what you then need to focus on, okay. But people just go away, they trade it, they might not trade at an optimal rate, they might not perform against that strategy very well at the start. So what they then decide to do is they, they decide to acquire more knowledge, right? They decide to become more of an expert. So they learn different strategies, they learn different concepts, they implement this, they implement that. And what happens is the more of an expert you become, the more difficult it is to be at that sweet spot and have an edge over the markets. Okay, this is the big, big, big problem. They don't focus on their performance against the strategy when they're at the sweet spot. They focus on acquiring more knowledge, right? And then it becomes very difficult because you've got this strategy that on paper works. You might not be performing at your best, right? You might not be taking all the trades, executing at a high level of performance. So you implement more strategies, and then all of a sudden when you start implementing different things, you lose that edge. So yes, you might have a lot of knowledge, you might know a lot, but this is what I call, um, essentially an analysis expert, right? Somebody that's super good at analysis. They can mark up the charts like there's no tomorrow, they can break things down in hindsight, but when it comes to making money they lack that ability. They don't know how to execute them into a position that's going to give them an edge over the market because they're always considering different things. They see that a trade that meets their criteria that they've already tested and built to ensure there is an edge— a trade meets those rules perfectly, but because they've got all of this other knowledge there, they consider, okay, well, what happens if this happens instead? What happens if that happens instead? Because you're thinking about so many different things. So what happens is you then don't execute on that trade that you should based on your rules. You second-guess yourself, you go against the data, you don't take that trade. And then what happens? That trade goes to TP. And you say, okay, no, like, next time I'm gonna, I'm gonna take that, take that trade. If it meets the rules, I'm gonna take it. And then lo and behold, you take a trade that meets your rules, and, and again, in this instance, you might take a loss, right? You might take one of the losing trades that that is inside your data. Okay, and then you go, oh, like, no, obviously this happened in this case, it did go up to this area instead of doing this. And then again, you revert back to trading based off of this other knowledge that you've got. And then what happens there? Then that trade goes and hits TP, and you go into this cycle, you go into this downward spiral where, because you've got so much knowledge, you can't focus and you can't sit at that sweet spot where you should have just focused and take an action. So what you need to understand is, I guess, this, this is only really ever going to work if you have got that strategy there that's going to give you that edge over the market, right? You've got a clear set of rules that you follow, you've backtested those rules, you know that if you follow those rules you're going to have an edge over the market and you're going to be able to make consistent results. But what we need to be able to do here is identify when we have an edge, when when we have a process that works. And then our goal here is to not become part of these people, part of this set of traders that sit inside this knowledge paradox. But it's now about taking action and following a process that I call the TRR process, okay? The Trade, Review, Refine process. Now the idea of this process is not about acquiring new knowledge. The idea of this process is to increase your performance to an optimal rate against the strategy that you have already tested. Okay, you need to be able to perform. So again, for example, right, you're going to put, put together a strategy that's, that says you're going to have a win rate of 70%, an average risk to reward of 3%, let's say a 1:3, um, and if you follow it, you're going to have an edge, right? Clear set of rules in place that you know if you follow, you will make money. And your goal is to get as close to that, to those back-tested results as you possibly can. So what you need to do is you need to go through this process where you'll trade against those rules, right? You'll follow those rules every single week and you'll see what results you get. And in the meantime, you're going to journal your trades, right? So every single trade that you take based on those rules, you're going to journal. What you're then going to have is a journal to then go and review. Now, this is where I put something in place called a weekly trade assessment, right? So what you want to be able to do is at the end of every single week, you want to be able to have a list of trades that you've taken a list of trades that you've backtested from that week, and you're going to have an optimization score. So let's say, for example— again, numbers don't matter here— but let's say, for example, you made 5% profit for the week, but you've gone back and backtested the strategy that you're trading, and you see that you could have made 10% in that week. So you're trading at a 50% optimization rate. Your job as a trader is to get your optimization rate as close to 100% as you possibly can, right? So what you then need to do is you need to go back and look at the— look at those numbers. You need to go back and look at the trades that you've missed and figure out why. You then need to have some sort of conclusion within this process here that is going to give you specifics to go and refine, okay? That's the important part, because it's these specifics that are going to allow you to then go into the following week with clear points that you need to work on so that when you trade in your next week's weekly trade assessment, your optimization rate that was at 50%, okay, your optimization rate that was at 50% is now going to go to 60%, okay? And if you don't follow this cycle, if all you then focus on is saying, I'm not getting the results that I want to get, I I need to increase my knowledge, I need to learn some more stuff, I need to implement this, I need to implement that. It doesn't matter how much you trade, doesn't matter how much you trade, if you do not have that edge over the market, that process is never going to make you profitable over the long term. So let me just hop over to this screen just here. And I've actually got an example here of a weekly trade assessment that I sent across to my students back in August, August last year. Now, this is really what this document should look like, right? You will have a document here and you'll have every single day where you have marked out all of the opportunities that have played out. So Monday, Tuesday, Wednesday, Thursday, Friday, okay? You're gonna map out absolutely everything. Again, it's gonna have to be based on the process that you, that you trade, right? You have to be following a certain set criteria. That criteria cannot change. You have to have a proven system there, right? All of your trades should be following the same rules. And what you're then going to have— again, if I scroll down, we're at Wednesday— we're then going to have is essentially a list at the end of this document that's going to look a little bit like this. So you're going to have— so for the week of— on your EUR/USD London session, we had this trade, this trade, this trade, this trade, right? I made a total return of +1R, okay? So 1% risk, I made 1% this week. I missed 2 opportunities to make more money, okay? I had a +1R on one of the trades that I took, right? I cut a trade a little bit short and I should have made an extra 1% on that trade, okay? As we can see here, it should have been a 4R trade. And then I had a second entry on Thursday which, if I took the position would have given me 4.45% return. Okay, my job is to conclude and understand why I miss these positions, right? So you could be looking at this and say, okay, well, I missed that trade because I decided to go and get a coffee in the middle of the trading session, and the opportunity played out whilst I was making a coffee and I missed the trade. Okay, well, what's the conclusion there? The conclusion there is you have to stay focused. You can't get distracted by other things because you're going to mis-trade. You're going to miss the opportunity to make money. You might look at a trade and say, oh well, I actually thought that that trade was going to do this. Okay, well, what that does is that reaffirms that you need to stop thinking and start trusting the rules that you have in place because you've already tested the data on those rules. You know that you need to just execute without that emotional decision-making behind it. So My outcome should have been 6.45R for this week. I only made 1R in profit. Okay, so my optimization rate was actually pretty low. Um, and what did I conclude? Well, I need to stay focused throughout the session. Don't get complacent just because it's a tougher week, as you would have come out on top, right? Okay, so the trade that I had missed here, um, there was one trade that hit breakeven on Thursday. I think it was this one here. And then there was a second entry that I could have taken, but because it was a frustrating week, I took a couple of losses, took a breakeven. I got complacent and I walked away. The trade was completely valid. I shouldn't have walked away. It was in within my trading hours, but I got complacent. I left the markets, I left my charts, I left the screen, I walked away, and I missed an opportunity to put myself into a position where I would be very, very nicely in profit for the week. Okay, so what I then did the following week, I reminded myself of this every single day, and that gave me a key thing to go and improve on. Okay, gave me, gave me specifics. So we go back to this. All I did here was I traded as per my rules, I journaled all of my trades, and at the end of the week I reviewed that performance. From that review of performance, I understood that I was losing out on profit not because my strategy wasn't profitable but because I was getting complacent and as I let— I was letting my emotions dictate the decisions that I made, that then gave me key points to refine on. So when I came into the following week when I was trading, I could get a better optimization score. Okay, and that's how you improve as a trader. That's how you get yourself out of this knowledge paradox. That's how you ensure that when you're at that sweet spot, you're acting on becoming profitable and making money and not acting on becoming an expert. Trading does not reward the people with the most knowledge. It rewards the people that have an edge over the market, over the markets, and that can perform at an optimal rate. Okay, that is the key thing to understand here. So really, your job as a trader is to, number one, get yourself to this sweet spot where you have a strategy and you have data behind that strategy that tells you, if I follow these rules I will make money. Okay, that's your first job. Your second job is to put yourself in a position where you can trade at an optimal rate against that strategy, right? So you're gonna have essentially, as a trader, you're gonna have two lines when it comes to performance. Okay, you're gonna have one line here which shows your strategy's performance, right? So we obviously have gain on one side and then trading days on the other, right? So this might be for the week, this might be 10%, let's say. So your strategy might have made 8% that week, okay? You're going to have this line here. You're then going to have another line which is your performance, okay? You might have made 3%, okay? So you've got a 3% gain. Your job as a trader is to have a focused strategy that has already been proven to give you an edge over the long term. Your job is to narrow this gap here. Your job is to get these two lines as close to— as close to possible as you possibly can, as consistently as you possibly can, right? And again, the great thing about doing this is, right, even if you Any strategy is not going to make you money every single week, not even every single month, right? You have to understand that, and your data will tell you that as well. So if you go into a week where you have lost money and you're cut— you're— the Friday session is over and you're feeling frustrated and you're feeling like, oh, I've not made any money this week, I'm really annoyed, I'm really peed off. Well, the one way to get rid of that emotion is to go back through, collect that data, okay, collect the data and understand if your performance is a true reflection of what your strategy has provided. Okay, so the last couple of weeks actually with the strategy that I'm trading, the opportunity hasn't really been there, right? Hitting a sort of breakeven, maybe marginal profit, um, was really the best that we could have done. Over the last couple of weeks. And I've had a number of calls with some of my students, and we looked at their weekly trade assessments, and they took clarity away from those sessions because we can conclude with the data that their performance is reflective as to what their strategy had offered up in those weeks. Okay, so when you come into, into the following week, you're not frustrated, you're not acting emotionally, because you know that what you have done is a true reflection of what you should have achieved. Okay, and again, if you've got the data there to suggest that, okay, this process is profitable long term, you know that, okay, these 2 weeks of trading, it's just a down period. This is, this is the result I should be getting in this case. Okay, so just to recap then, we go back to this just here. The absolute best way to become a better trader is to go through this TRR process: trade, review, and refine. You trade your week, you journal your trades, you complete a weekly trade assessment at the end of each week so you can conclude where you need to improve, or if you need to improve. You then make those refinements so that your trading then becomes better, okay? It's not about having the most knowledge. It's about having a data-proven set of rules that you follow every single day that you know if you do, you will make money. It's then about performing as close to where your backtested data has, has showed you you should be, okay? Getting that optimization rate as close as possible. If you can do that, then it's not just an opinion as to whether you're a profitable trader. You have the statistical proof and the data behind what you're doing to say that, okay, what I'm doing is profitable, and if I do it well, then I will make money. So I'm going to leave that with you. As always, any questions, just let us know. Make sure you like, comment, subscribe, all of that good stuff. But I really hope this helps. I know this is a very— I mean, it's a fairly deep question, right? It's a fairly deep question. How do I become a better trader? And I'm kind of talking to 90-95% of people that have tried trading, because in reality only 5-10% of people really consistently make money doing this. But if you follow this process, you will become a better trader and you will consistently pull money from the markets. So I'll leave this one with you, and I'll see you in the next one.