The Road to Successful Trading

Chapter 4: Developing an Effective Trading Strategy 
 
Developing an effective strategy requires a clear understanding of your goals, your risk tolerance, 
the time you can devote to trading as well as the appropriate investment vehicles.
If you have ambitious goals such as trading for a living or trading to accumulate a lot of wealth as 
quickly as possible, you should be considering trading as a full time business. In this case, you will 
need to develop “the full Monty”, which means building your lifestyle around your trading 
activities. All trading activities should start with a trading plan but trading fulltime will require the 
most comprehensive plan. It starts with defining what is important to you. If, in reality, trading 
allows you to spend more time with your family or live where you want or any goal other than just 
the money, your trading plan should be designed with this in mind.
Full or part time trading? 
 
Consider this: if you are going to be a full time trader, invest in your total education as a trader.
Successful traders have the potential to make impressive amounts of money and live a most 
impressive lifestyle. Most professionals spend years in expensive higher education and taking a 
continuous series of professional courses. They must invest a lot of time and resources before they 
can even begin to earn a decent income. A successful trader can develop a career with high rewards 
but it too has some costs. Just because you don’t need a degree doesn’t mean that a significant 
targeted education isn’t necessary.
Fortunately, with the Internet and a recent rifting of pro traders and market makers from their 
professions as more markets have gone to electronic trading , getting an excellent education on all 
aspects of trading is now available to just about anybody, anywhere. But it does take financial 
resources, time and the commitment to learn some fairly sophisticated concepts. 
Keep in mind that professional traders usually go through an intensive training program of study 
and at least several years of mentoring before they can be considered ready to trade by their 
employers. That training cost money and you will be “employing” yourself. To think that you can 
start trading without proper preparation is naïve and self destructive. Not only does a trader need a 
comprehensive program of education on economics, investments and rules and regulations but also 
a program on how to trade. This is why professional trading houses prefer a mentoring program 
because it combines straight book work and the soft, yet subtle psychology of trading.
How to Design and Construct An Effective Trading Plan 
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All aspects of trading can now be obtained from a competitive industry, usually internet based. For 
instance, there are professional traders who offer a complete mentoring course from beginner to 
advanced levels. There are online Universities that will teach a wide array of specific courses taught 
by professional traders. There is even a program solely dedicated to the psychological aspects of 
trading found at The Disciplined Trader (
www
.
thedisciplinedtrader.com)
.
Many of the online brokerages offer an excellent selection of courses, seminars and forums for all 
levels of traders. Additionally, essential to all traders is the paper trading account offered by the 
brokerage. This is an essential tool in developing and tweaking the trading system before risking 
capital.
In summary, before you can develop a trading strategy-no matter whether you trade full or part 
time-, you need to become educated on the many types of trading vehicles and which ones might be 
best for achieving the goals you set.
If you plan to be just a part time trader, you will need to make sure that your trading won’t become 
a distraction to your other activities and vice versa. Often, business owners will trade a portion of 
their cash reserves to help boost total income; however, it is easy to get caught up in the spirit of the 
whole thing and take your eye off the ball (your business). 
If you are an employee who will be trading and monitoring your trades while at your primary job, 
make sure to first clear it with your boss. Try to establish some mutual rules about when you trade 
and how to keep your trading activities separate from your duties as an employee. Assure your boss 
that the business duties come first.