If You're Not Making Money with Trading, Here's How to Fix It

If you're not yet making money with trading yet, what can you do?

It can be for one of the two reasons.

Either you're not yet trading, and this is when you have one set of challenges, or you are trading and you have a different set of challenges.

Let’s talk about the first group of traders

The first group of you, who right now might not be trading. Let me ask you, ‘Why are you not trading yet?’

For most people, it’s because they’re confused, right?

They don't know what to trade and they don't know what trading strategy to use. They sometimes don't know what broker to use.

They don't know what tools to use and sometimes, what I hear when I'm doing the live boot camps, is...

Traders tell me they're overwhelmed because there's so much information out there. It's hard to find somebody to trust.

I mean, somebody is saying, “Well, you'll make a killing if you trade penny stocks” and then somebody else is saying, “You'll make a killing if you trade forex” and somebody else says, “You'll make a killing if you do covered calls.”

And sometimes they do weird expressions and say, “Okay there's calendar calls and butterflies and arbitrage trading,” whatever this might be.

For those of you who are not trading yet, I want to break this down first of what to do.

If you’re new to trading, it definitely makes sense to first follow a step by step process and have your own trading strategy, or you can use somebody else trading strategy.

The 3 things that you need to master are:

  1. What to trade. You can trade stocks, options, forex, crypto currencies, futures.
  2. When to enter
  3. When to exit

Years ago when I started trading, I didn’t understand that it’s really just these 3 things you need to know as a trader. I made it much more complicated and this is why I got easily confused and overwhelmed.

Everything that you learn, you need to break down into these 3 categories. So, let's talk about the first one.

What should you trade?

If you have been following me for a while, you know that I recommend for beginners to start with stocks and options. As you get more experience, then you can move on to futures.

The other day I did an article about penny stocks. Don't start with penny stocks. I mean, learn how to trade stocks and options first. These are the basics. Then you can graduate to other trading methods like trading Forex or futures.

When should you enter?

This is where I made it way too complicated. At the beginning of my trading career, I was so focused on the entry. I wanted to time the entry right.

I didn’t understand that the exit is equally important or maybe even more important than the entry. That's very important. What do you do for the entry?

Now you can trust fundamental analysis, right? This is where it's very easy to get confused about the EPS, earnings per share or PE ratio and so on, and why I personally like to use technical analysis.

When it comes to technical analysis, for me...

The best way to trade is using indicators.

I like to use 3 indicators for my trading and this is Stochastics, MACD and RSI.

The reason why I like to use 3 indicators is that they're confirming each other. It’s like a triple check. And the second thing about indicators: they're very black and white. So, for example, either the RSI is above 50 or it's not or the Stochastics is above 50 or it is not.

There’s no room for interpretation and for me, that's good, because when you give me too much to analyze I often suffer from what they call "analysis paralysis." Is this something that sounds familiar to you?

Have you ever had the problem of suffering from analysis paralysis?

Where you couldn't pull the trigger because you're so confused. "Should I buy now or should I rather wait."

This is when I made it easy for me by using indicators, and as soon as these indicators are telling me 'buy,’ this when I'm buying and when they tell me 'sell,’ I'm selling.

I mean, without questioning because here's the deal: The entry is not that important. What's more important is the exit. And that's actually step number 3…

When should you exit?

When exiting, there's two ways.

First of all, it's either with a profit or with a loss. What’s important to me is that I know when to exit before I even enter the trade.

This is why I calculate my exit point - when I'm wrong, and also when I'm right, when I want to take profits before I even enter the trade because this way, I'm not emotionally attached to the trade and a nervous wreck.

See, in the very beginning of my trading career, I remember I didn’t place a stop loss and I didn’t place a profit target.

I was so focused on the entry that when I was finally in the trade I’d think... "OK... what do I do now that I'm in the trade?" And this when greed and fear kicked in for me.

What I mean by fear is "I don't want to experience a loss" and by greed "let's make a million dollars on this trade." Not really a million but you know what I mean, right?

I’d stay in the trade for way too long, hoping that this is the trade that will make me rich, that'll let me retire it rich.

An example of the way I like to trade is risking $100 trying to make $200 and so on depending on your account size.

Based on your account size you might say, "I'm risking $1,000 trying to make $2,000." The idea here is that you make more money on your winning trades than you lose on your losing trades.

Here’s why this is so important

Think about it: if you make $200 on every winning trade and you lose $100 on every losing trade, you can be wrong half of the time and still make money.

If you have 10 trades and 5 of these trades are losing trades, and you lose $100 on each losing trade, this would be 5 x $100 - so you lose $500.

On the other hand, when you have a winning trade, you take money off the table - close the trade as soon as you see $200.

Let's say you make 10 trades: five trades are losing trades, so you lose $500.

5 trades are winning trades, and each winning trade you make $200. On the 5 winning trades, you would make $1,000.

So, how much is left after 10 trades? $500, right?

If you make 5 x $200 on your winning trades - $1,000, and you lose 5 x $100 on your losing trades, you lose $500.

This is something that has really helped me to turn my trading around:

understanding that the exit is equally important, if not more important than the entry.

This is how it breaks down for those of you who are new to trading and who are beginners.

You always have to look at all of the information coming at you and sort them into these 3 buckets.

1. What to trade. Again, I highly recommend that you start with stocks and options and then graduate to futures, and maybe forex. Never trade penny stocks or cryptocurrency.

2. When to enter. For that I use indicators.

3.  When to exit - and I've got to know when to exit with a profit and also exit with a loss.

Now let’s talk about the second group of traders

I want to talk to those of you who have been trading for a while and are struggling to make consistent profits and achieve the results you’re looking for.

Trust me, I've been there. I know how it feels when you're putting so much time and effort and money into this trading thing and it doesn't seem to work out.

The same as for beginners, experienced traders also have to look into these 3 buckets and see "okay, where am I struggling?" And for some of you, it might be just trading a different market.

In the very beginning, I was focused on trading Forex.

I couldn't make money with it and here's why:

I was trading against the house, and therefore, I was losing.

When I switched over to futures, doing the exact same thing, suddenly I became profitable. So sometimes, it helps to switch the markets.

To this day I still keep a trading log, and I recommend this to everyone who is trading.

You should have a trading log where you write down exactly what you're doing.

  • When do you enter the trade
  • When do you exit
  • Do you go long or short
  • What do you trade
  • I also add a comment section

Here's the beautiful thing, when you do this, and when you have at least 40 trades, you can run an analysis and see what happens.

In the beginning of my trading career, when I felt that I was moving one step forward and two steps back, and I started looking at my trading log, I suddenly realized in my day trading that I was making money in the morning and losing money in the afternoon.

So what was the easiest way to improve my trading? I had to stop trading in the afternoon, right?

I also analyzed my trades and I realized that I was making money Monday, Tuesday, Wednesday, and Thursday, and that Friday was underperforming.

Friday was a day where I lost money. So what was the easiest way to improve my trading? Stop trading on Friday's, right? And again, this is individual. Everybody can be different.

Just because it doesn't work for me to trade on Fridays, doesn't mean it doesn't work for you. In fact, we have people in our private student group here at Rockwell who are doing phenomenally on Friday.

This is why it's important that you analyze your trades. Take a look at your log and see what you're doing wrong.

Again, always think of these 3 main categories:

1. What to trade. Is your market selection good? Is your stock selection good? Is your option selection good, right?

2. What about your entry? The way I like to trade is momentum based. I'm a trend following trader, which means that immediately when I enter, I want to see my position in green.

Does this happen to you or is it as soon as you enter that the trade goes against you? Because in this case, you might want improve your entry.

3. What about the exit? Are you keeping your losses small and are you making more money on your winning trades than you lose on your losing trades? If not, change that!

I see many traders who are losing more money on their losing trades than they make on their winning trades. Flip this around. Have a larger profit target and a smaller stop loss.

For those of you who would like to learn more, feel free to join me at one of our upcoming boot camps.

They're free.

We'll talk about:

  • What to trade and I'll show you how to find the best stocks and the best options.
  • When to enter and I'll show you the indicators that I use and how you can apply them in your trading.
  • When to exit and I'll show you the rules that I use. My trading is rule based because it works great for me. I have to have rules I can follow because whenever I'm winging it and saying, "Well, let's see..." It never goes well. I believe this is true for most traders.

Find out when I’ll be in your area next and register by visiting:  bootcamp.rockwelltrading.com

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