Winning Traders: How to Join the Top 5% Making Money

How many winning traders are there? According to some recent studies, obviously not official but still reliable, only 5% of traders earn "enough". To be clear, this percentage does not include the wealthy, but simply those who make enough money to be self-sufficient. The portion of those who have truly become rich through trading is even lower. This seemingly dramatic figure goes hand in hand with one that is truly shocking: 85% of traders, at the end of the calendar year, find themselves in the red, meaning they have only lost money with their investment activity. As mentioned earlier, the 5% figure is only dramatic from a superficial point of view. First of all, 5% cannot be considered a low percentage, considering the type of activity. Just to give an example, the probability of being contacted after applying for a job offer is on average lower. In the collective imagination, however, earning money in trading is considered a pipe dream, or at least a much less likely eventuality than securing a job. The reason is simple: common sense knows how to overcome the bottleneck in job searching, but does not know how to succeed in trading. Yet, from a certain point of view, the answer is the same. The "how" is quickly said: arriving prepared at the crucial moment. Those who seek a job and are prepared know that their chances are much higher than average. Similarly, the odds of winning increase for prepared traders. The problem, therefore, lies not so much in the percentage, but in the issue of preparation. In fact, the concept of preparation takes on a particular dimension in trading. Being a prepared trader, or at least sufficiently prepared to earn money and thus achieve self-sufficiency, means adopting a certain trading style, even a different mindset. Below, we list exactly the actions to take to truly call oneself a prepared trader and, therefore, have a higher probability of becoming a winning trader.

Study, study, and study some more

Studying is important for a trader. Everyone knows this, or at least those who are about to embark or have already embarked on this path. After all, it is unthinkable to arrive at the appointment with the market without a real knowledge of it, of the dynamics that move the price, of the techniques to predict it, of the strategies to protect capital. Therefore, study before starting to trade, possibly like crazy. On books, on ebooks, on forums, on blogs, on specialized magazines... Everything helps and everything should be taken into consideration. However, it is not enough. The other piece of the puzzle has to do with periods of study. The pre-trading one, in fact, should not be the only one. It is necessary to study even after starting. In fact, it is essential. Above all, it is necessary to study when you are one step away from earning a lot, precisely to make the leap in quality. Always study, to stay updated and to always be ready. After all, it is a rule that applies in the professional world. Only those who learn, who improve their skills, move forward. Why shouldn't it also apply to trading?

Conduct analysis but... In a certain way

Here too, apparently, nothing revolutionary or that does not belong to common sense. All traders know that one must engage in analysis to make progress in trading. Which analysis? Technical, fundamental, and sentiment... It's obvious! And it's just like that: technical analysis is useful for identifying future price movements through the leverage of statistics; fundamental analysis takes into account the influence of the external world; sentiment analysis is useful for anticipating market moves. Here too, however, a piece is missing. In fact, a fourth one is missing, which has only recently come to the fore: institutional analysis. Institutional analysis is the type of analysis that does not refer to statistics, the study of the external environment and news, or the sentiment of the trading community. It is the type of analysis that exploits a very particular leverage: the moves of large traders, commercial banks, large investment funds, etc. The underlying mechanism is simple: "big" investors possess more information than small fish, so they can be trusted. If they are moving in a direction, it means that direction is right. How can you understand the behavior of the big players? Well, the information is only confidential to a certain extent. This category of traders, at least in the United States, must release a weekly report (COT) describing the positions opened and closed in that given period. A semi-public document that can also be used as a source of inspiration by smaller traders. Obviously, this type of analysis is not easy to do. Guess what, it requires studying.

Engage in money management and risk management

This is a "normal" piece of advice, meaning it does not offer real food for thought. Even the need to undertake capital protection and risk control actions is common knowledge. However, given the importance of both money management and risk management, it is good to mention them in this article. Money management is fundamental because the first rule for earning money is... Not losing money. This is obvious, but often - especially if you are a beginner - the focus is on the performance of the individual trader. Money management techniques are fairly consolidated and often result in the exact determination of the best possible position (from a quantitative point of view). Risk management is equally important (and correlated with money) because it allows to "patch up" one of the structural problems of trading: uncertainty. Thanks to risk management, trading can establish exactly how much money to put at risk. The most frequent, as well as effective, risk management action is the placement of a stop loss. Here too, we are dealing with a complex technique that requires time and effort to be mastered at its best.

Give time time

Time, indeed. It is a fundamental variable. If managed intelligently, especially from an emotional and mental point of view, it can represent a resource for growth. Many traders end their careers simply because they have an inadequate perception of time. Losing is normal, almost physiological, in the first months. Even in the first years. If after many months a trader does not see the desired results, it does not mean that the situation is destined to always remain the same. Also because, as much as the collective imagination associates trading with concepts such as frenzy and speed, it is actually an activity that expresses its potential in the medium to long term. This partly explains the reason for that 85%. Almost four-fifths of traders find themselves at a loss at the end of the year because the number of traders has increased, especially among non-experts, and for them, losing is normal, at least for the first months. Moreover, many of those who could make a turnaround in a short time, discouraged by losses, withdraw. The issue is complex, also because the path that leads from defeat to victory is very varied. How much time does it take to become a winning trader, if you embark on a real path of growth? Objectively, it is not possible to provide numbers that are the same for everyone. The advice is not to give up, apart from patrimonial risks. Obviously, if you have lost more than you can afford, cut it out.

Dedicate several hours to trading

Part-time trading is a real possibility. Let's be clear, it does not preclude the chances of success, on the contrary. It's just that to set up a profitable part-time trading activity, some counterintuitive measures are necessary, which are also difficult to implement. For example, it is necessary to organize time in an obsessive way. This is because trading requires consistency, application, and... Time. Therefore, it is simpler, if your financial situation allows it, to dedicate as many hours as possible to trading. Also because it is such a complex activity that it requires, just for a "morning" analysis, a few hours on charts, news sites, etc. Unless you have scientifically embarked on the path of part-time trading, with all the necessary "precautions", you will not be able to avoid dedicating several hours to trading. How many hours? Actually, here too there is no exact, objective figure that is valid for everyone. Winning traders, however, net of the automatic approach, practically work a full-time schedule. Much of which, in reality, is spent on analysis and planning processes.

Adopt the right mindset

This point is truly complex and also mammoth. Rivers of ink have been spilled on the relationship between personality and trading, between psychology and traders, between emotions and trading. The risk, therefore, is to say trite and hackneyed things. For example, that it is necessary to maintain absolute fidelity to one's trading plan, that it is necessary to approach trading with decisions already made, so as to avoid emotions compromising lucidity. One could also mention the age-old question of anxiety, to be "cured" through concrete tools, such as an even more rigorous money management. What disruptive thing can be added? What all great traders know: it is better not to think about money. This might seem like a paradox, but it is not. Money must be treated as any other variable, a variable to be managed scientifically with money management. Money should not be an obsession. Moreover, it should not be considered as the total objective. The one to look at more closely, and therefore intermediate, should simply be the improvement of one's performance. Looking too much at money is dangerous because it stimulates emotions, especially negative ones: anxiety, fear, or worse, euphoria and exaltation (if by chance you win). This is a technique, that of looking at the intermediate goal and not the final one, which is widely used in many contexts, especially competitive ones.

Conclusions

So, in conclusion, what is the secret? At this point, it is not difficult to identify. There is a common thread that ties all the points we have listed: diversity. The only way to hope to enter the 5% club is to behave differently from the masses. After all, if the masses do not earn money, there must be a reason. Finally, a clarification. All the advice we have given in this article is indicative. It is not certain that, once followed, your account will soar and you will have become winning traders. More than the score, when it comes to trading, the performer matters. Certainly, what we have said so far can be useful to know in which direction to move, which model to be inspired by. One thing is certain: you will struggle to achieve the goal of self-sufficiency. Once achieved, however, it will be beautiful to look back and see the path you have traveled.