Ask many seasoned traders to describe their most profitable trade, and you’ll hear a fantastic story. It’s usually purely serendipitous. For example, they may have been going long on a large position when suddenly a media reporter talked up the company for no good reason. The stock price shot up as the masses heard the news, and they made a killing. These stories are thrilling.
They inspire you to hone your trading skills and master the markets. Who doesn’t want to be at the right place at the right time? But if you want to be a profitable, active trader, you can’t merely wait for a rare trading opportunity to present itself. Most of the time, trading is about making trade after trade to the point that it seems mundane. Rather than seek out the big, thrilling trade, it’s important to remember that small trades matter a lot.
Influential advertising executive, Bruce Barton once observed, “Sometimes when I consider what tremendous consequences come from little things … I am tempted to think there are no little things.” As stirring as big trades seem to be, it’s the smaller trades that keep you in business. Many traders feel they reach a plateau when trading. They make trade after trade and little seems to happen. They don’t suddenly find the trading Grail and achieve the great wealth and status of their dreams.
Whether they realize it or not, however, they are still making progress. Each new observation of the market, each trade they execute, no matter how small, adds to their wealth of knowledge. They intuitively learn what to do and what not to do. They may see a slight variation of a classic chart pattern emerge and learn just how far the pattern can deviate from the prototype and still forecast the movement of the stock price. On another day, they may learn a new way to place a protective stop so that they protect their risk, yet don’t get stopped out prematurely. This small everyday, seemingly insignificant experiences matter a lot.
Trading is challenging. Few survive to trade over many years. The traders who do survive, however, know how to stay focused and patient. They don’t go for quick thrills and unrealistically huge profit objectives. They know that losing is easy and can happen in the blink of an eye, but building capital back up can require difficult work over many weeks. Instead of going for risky, exciting trades, they seek out high probability setups, take steps to protect capital, and execute the trade decisively, according to their trading plan. They may not have an exciting tale to brag about to their friends, but they take home a tidy profit. And when they make trade after trade, the small profits add up, and they end up with big profits in the end.
So when you feel that your earnings have reached a plateau, don’t get discouraged. As long as you are making profits, and staying in the game, you’re continuing to develop your trading skills. You’re adding to your knowledge base. You’re developing a more intuitive feel for how the markets operate. It may not seem like you’re making the profits of a “Market Wizard,” but if you keep at it, you’ll be one of the rare few that join the ranks of winning traders.