3 Steps to Building a Trading Strategy

Trading can be one of the most difficult skills to master. Many new traders make the mistake of seeing large profit potential and dive into the markets head first.

Trading is a zero sum game and should be treated with as much respect as fighting on a battlefield. Only fools rush into battle without long hours of training.

Patience and persistence is what differentiates the amateurs from the pros. If you want to stay in this game for the long haul then there is no rush.

Study the Battlefield

The general who wins the battle makes many calculations in his
temple before the battle is fought. The general who loses makes but
few calculations beforehand.

-Art of War Sun Tzu

Effective trading requires constant study and analysis. Serious traders make a habit of reading up on economic news and mapping out trade analysis on the charts. The charts are a map that can help guide you in the right direction.

Absorb information from multiple perspectives and take both sides of the coin into account. Make sure to study the charts of other traders to broaden your perspective. This will also give you a sense of the market sentiment. Disregard perspectives that are too emotional with exaggerated claims.

Regardless of how advanced you think you are at trading, never stop learning as a student. Sharpen your skills by reading books on trading and explore multiple theories. Even if you feel a theory is wrong, study it to learn what not to do.

Some people will trade multiple markets, which allows for more opportunities. Diversity can be a good thing but it’s recommended you study one market like the back of your hand first.

Master your primary market before branching out into new territory. Get to know your market like studying the currents of a river.

Spend hours studying charts in multiple time intervals. Map out a macro analysis starting with the entire history of your market. Master your market and it can pay you tenfold returns for the time you put into it.

Have a Plan of Attack

Victorious warriors win first and then go to war, while defeated
warriors go to war first and then seek to win
― Sun Tzu,The Art of War

Once you’ve studied the battleground, it’s time to develop a plan of attack. Never go into a trade without first having a strategy!

Your goal should be to cut as much of the gambling out of your trades as possible. There is always the element of chance but you want to find consistency.

Start off by mastering one strategy before moving into others. Build a strategy that’s most suitable to your personality.

Test Your Strategy

By three methods we may learn wisdom: First, by reflection which is
noblest; Second, by imitation, which is easiest; and third by
experience, which is the bitterest.

-Confucius

Build your strategy and then test it on the battlefield. A theory only
becomes fact through practical application.

Always test new strategies with small amounts of money. There is a
refining process that’s required to perfect your technique. Mistakes
are a part of process and you don’t want them to be too costly.

Perfect your strategy and then slowly increase the size of your
trades. The reason why it’s important to start off slow is to
acclimatize your mind to trading larger sums. Big trades can come
with an increase in stress levels which can sabotage a perfectly good
trade.

There are no short cuts, you need to practice before mastering the
markets.

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Rocky

Rocky is a cryptocurrency analyst, strategic consultant, educator, position trader and investor. He started his journey learning about Bitcoin in 2013, became obsessed with it and dropped everything to work full-time in the space since 2015.