The Road to Successful Trading

Chapter 2: The Strategic Philosophy of Trading 
 
 
There are two fundamental and interconnected strategies in becoming a successful trader: 1) A 
trader learns how to identify high probability trades with regularity and cut losses immediately; 2) a 
successful trader has more winning trades with more profits than losing trades. That’s it folks!
For example, if you make 20 trades and win 60% and the winners have an average gain of 10% and 
losing trades have an average loss of 3%, you will have a net overall gain of about 7% It is the 
combination of win-loss ratio and the average differential between profitable and losing trades that 
determines success…over time. 
Trading is not about hitting home runs but hitting for average
. 
Traders develop a trading system which will provide a higher than chance win-loss ratio and try to 
make sure that profits have higher return on investment (ROI) than losing trades. In theory, even a 
less than chance ratio can still provide for profitable trading if there is a significant difference in 
profitable versus losing trades. 
Typically, successful trader will develop trading system that will provide at least a 65% win-loss 
ratio. Some even go as high as 75%. But the rule of maintaining higher profit margins than losing 
margins is key. If you win more trades but have higher overall loses, the win-loss ratio means 
nothing. So, to become a profitable trader, try to maintain a higher win-loss ratio and a higher 
overall percentage profit margin over losing trade margins. But being a profitable trader may not 
mean the same thing as what you define as a “successful trader”. That is defined by your goals. 
Once a trader develops a proven system, it then becomes a matter of discipline in following the 
established rules and procedures of the trading system in a totally consistent manner and it then 
becomes a matter of the number of trades and not deviating from the trading system. Sounds simple, 
right? Needless to say, the devil is in the details. 
How to Design and Construct An Effective Trading Plan 
8

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Once a viable trading system has been defined, tested and proven, success is mainly a matter of 
discipline and a mechanical approach to implementing the trading system. But herein lays the 
weakness of most trading systems…..the trader. All kinds of psychological factors such as fear of 
losing, fear of being wrong, fear of losing precious resources and many other human emotions can 
throw the trader off the defined track and cause the trader to deviate from the trading system.
You will see as we progress through the book that successful trading is a combination of developing 
mechanical systems based upon fundamental and technical indicators and the most difficult skills of 
all: self control, patience and ego dominance.
You see, it is the human elements of emotions, expectations and subconscious programming that 
make or break most traders. You can read all the books there are on the subject of trading but real 
time emotions are the greatest challenge to a trader.
All of us develop our own particular baggage and much of it we are not fully aware until 
confronted. Trading, with its pressure points of fear and greed, forces that confrontation with 
ourselves. In fact, most successful traders will tell you that it’s the “headwork” that makes the 
difference in winning over time. 
An essential part of the philosophy of trading is the mental preparation needed to confront our 
weaknesses. In fact, many call this part of proper preparation as the Zen of Trading.
In the book, we will discuss how to develop proper mental preparation and creating the mental 
discipline to confront our fears associated with losing and self doubt. In fact, there is currently only 
one program designed to train traders in the techniques of maintaining the proper mental mindset 
for trading and that is The Disciplined Trader Intensive Program (
thedisciplinedtrader.com
).