Master these 3 Pillars of Trading

These are the 3 pillars of trading that you must master if you want to become a successful and profitable trader. 

I call it the 3 Ms.

Method.

Money Management.

Mindset.

Method

Method is how you trade the market.

There are 2 methods where you can use to determine whether you should buy or sell.

Technical Analysis: analyze the charts to determine whether you should buy or sell using tools like trading indicators, trendlines, support and resistance levels and candlestick patterns

Fundamental Analysis: studying the economic news and announcements that will affect the economy. The state of the country’s economy will determine the strength of the country’s currency. 

Money Management

Money management is basically how you manage risk and reward.

As traders, our goal is to take the trades which will give us the lowest risk and the highest reward. 

You need to figure out:

• How much money are you risking per trade?
• What is your risk-to-reward ratio?
• What’s the maximum drawdown you can accept in your trading account?  

Money management will allow you to minimize your losses and maximize your profits so you can be profitable in the long run.

Mindset

The final M is Mindset.

When you are trading your hard-earned money, you are going to experience a lot of emotions like fear, greed, and doubt. 

ALL these emotions will cause you to make stupid decisions.

Play stupid games, and win stupid prizes.

This means that if you trade based on your emotions, you will lose money

In trading, you don’t get paid for your time.

You get paid by your decisions so it is important for you to control your emotions when trading so you can make swift and rational decisions.

Everything begins or ends with your trading mindset.

If you are not in the proper trading mindset, you won’t be able to make money on a consistent basis

Remember you cannot control the market, you can’t control how much money you will make today or next week.

But there is one thing you can control and that is yourself.

You can control how you react to what the market is showing you

You can control whether you stick to your trading plan or not

All 3 Ms are equally important 

These 3 pillars will be the backbone of your trading plan. 

This is like a chair with 3 legs.

If you remove one of them, you will fall and hurt yourself or in this case your trading account.

This means you need to master ALL these 3 pillars if you want to become a successful trader.

1. A diet won’t help you unless you stick to it. You won’t be profitable in trading unless you follow your money management rules and you stick to your trading strategy that's working.

2. Money management can’t help you unless you have a winning trading strategy that is backed up by a profitable track record

3. There’s no trading strategy that can make up for poor money management.

You can have the best trading strategy in the world that works 90% of the time but still lose money because you don’t practice proper money management.

Example: when you win, you make $50 but when you lose, you lose $1000.

With a 90% win rate, meaning you win 9 out of 10 trades.

1 loss can still wipe out all the profits you made from those 9 winning trades

 - Brad (The Trading Geek)