THE BLOG

Smart Money Trend Trading: The Insider Secrets!

18/04/2013 14:14 BST | Updated 17/06/2013 10:12 BST

"There are no secrets", sorry to disappoint you, is the one and only answer I have to the almost daily questions I get asked on what are the secrets to trading success. The reality is that my trading success is simply down to having the right approach from the off.

Here are what I consider the 10 key ingredients, my secrets if you like, of what it takes to join the elite 5% called the Smart Money that make a full time living trading the money markets:

1. Have the right mind set

Approach trading with the understanding that it takes time to understand and master and is not a get-rich-quick scheme. By doing this you will avoid the gamble-like approach that is the undoing of 95% that enter the trading world. The education period takes a little time but once mastered, the rewards are exponential and potentially life-changing.

2. Be well-equipped

Invest in the best software with the right tools and functionality that will help you to optimise your trading potential. Being able to scan and analyse the market as well as manage your trades through the software will bring a mechanical, efficient and ruthless approach that will give you the edge you need to extract consistent profits.

3. Have a number of proven strategies

Do not rely on a single strategy. A Smart Money trader understands that the structure of the market is continuously changing and has various strategies to deal with the ever-changing conditions and that define exact entry and exit points. We have a thorough understanding of price movement in order to know exactly when to use a particular strategy.

4. Risk-management always in play

Knowing how to risk small and win big on a consistent basis is fundamental to trading success. Any "punter" can have a couple of lucky bets but only the well-initiated know how to do it year on year and make a very healthy living from it.

5. Build a solid trading plan

Trading should be run like a business. A trading plan is a contract with yourself stating the rules that you will follow 110% during your trading career. This can be adapted and changed as you progress. With the right education, a trading plan simply falls into place as a trader knows exactly what it entails.

6. Do not over trade

Pick only the low-hanging fruit. Trades are based on probabilities. Take only the high-probability setups and let them run to bring home the hot fresh bread. This method of trading will stop you from over-trading and handing your profit back to the market. Less is more as they say.

7. Trade the trend

The trend is your friend. Do not try to pick tops and bottoms by trading reversals and certainly do not scalp for profits. It is far more profitable, stress-free and far easier to let a trend establish itself, usually missing the beginning of the trend, and going with the market rather than fighting it. Ever tried swimming against the tide? You won't get far. Do not let the money be the focus of your trade. A successful trader goes with the trend and looks to ride the wave for as long as possible. You will be in the trade longer, catching the big moves, and actually need a lot less time per day to actually manage your trades this way. A full time Smart Money trader spends no more than 30 minutes a day trading. He has complete control over his money and more importantly his time.

8. Dedicate yourself

Trading requires time to be mastered. Consistently apply yourself and practise until trading has become second nature to you. Always look to be a better trader then you were yesterday. It really is not as complicated or as difficult people think if approached in the right way. This is the only way for the penny to drop on that there really are no secrets.

9. Do not waste money on signals or robots

Signal services, companies telling you when to enter the market, only make money for those selling them. You are not told the variables that go into producing the signals. After weeks of following these signals you will find yourself out of pocket and what have you learned in the process? Nothing! Human discretion is essential in trading, knowing when to override a signal produced by the software in unfavourable conditions. Robots or Black Boxes are computers that trade for you and require little human involvement after their initial programming. Robots are not robust enough to deal with the organic nature of the market. They are simply ego-driven fantasies born in an environment where there are no rules and where every player is an alpha male. Stay away from them. There is simply no replacement for education.

10. Ignore the noise and get educated

The trading world is full of "experts" and "gurus" in the media who quite simply have a different agenda to you. Many are associated with brokers who encourage you to open multiple buy and sell signals a day simply to get their commission per trade. Instead, find a trading mentor, one who is a full time trader and who will share with you his knowledge and expertise and give you the support you need to put them into practise until you have mastered them. This will hugely speed up your learning phase. What can takes years on your own, and in reality many never achieve, will take weeks with a top mentor.

Trading is simple but not easy as the well-known phrase goes but by having a level-headed approach and investing properly at the start of your trading journey, you will reap the live-changing financial rewards on a long-term basis. It may take some time in the beginning, just like any other industry one chooses to master, but once you have learned how to make your money work for you, your patience and dedication will be exponentially rewarded.

Everyone is an expert. Go to the gym and Timmy-No-Muscle is dishing out advice after days of benching the non-Olympic bar with 2.5kg biscuits on each side. The trading world is no different. Online forums are notorious for the blind leading the blind and the only ones to prosper are brokers and so-called teaching academies.

By following these points, and staying away from the beaten track that leads to one blown account after another, you will give yourself the best possible foundation for trading success.