The first sign has to do with how frequently you trade. Do you trade daily? When I started trading, I used to trade almost every single day. But as I got better at filtering good and bad markets, my frequency of taking trades dropped while the profit I made increased. Sometimes, I avoided trading for weeks and months. In fact, recently, the number of trades I took in a year was the lowest in my trading journey, but the profit was the highest it has ever been. Factors like compounding, different account size, and favorable market conditions were some of the reasons for high profit with few trades. But the biggest reason was I stopped trading when I saw the market was not worth trading. This is a huge deal! When I was a beginner, I used to hear other people say, ‘Saving money is also trading’ or ‘Not trading is also trading.’ But back then, I didn’t really understand how important not trading actually is. Now that I know a little better, I would put ‘not trading every single day’ as one of the most important signs that shows if you are good at trading or not. On the other hand, there are a few trading styles that might work fine daily. But since most trading strategies don’t work every single day, most traders should not be trading every single day! In my trading journey, the ‘Not Trading Every Day’ sign gets an 8 out of 10 on the importance scale.
The next sign has to do with how you filter bad trading setups. How do you do it? One of the ways I filtered bad setups was by writing down my exact entry rules. Now, I’m not talking about writing simple entry rules, as that probably won’t work. I’m talking about writing every step you take before taking a trade in detail. Simple entry rules can sound like, “When the price comes near a support, I take a long entry.” On the other hand, exact entry rules sound like this, “When the price comes near a support, the momentum should drop, the price should give a clear engulfing candlestick entry pattern. The entry has to be inside the support area. I will take the entry at the closing price of the entry candle. I will set the stop-loss below the support area. I will set the profit target at the same distance as the stop-loss,” and so on. In my beginner days, when I started writing down my exact entry rules, I realized I didn’t have any. They looked more like this. This was an eye-opening moment for beginner me, as I realized that even though I thought I knew how I was trading, I really didn’t. Once I focused on creating detailed entry rules, my trading became more consistent. If you have written down your exact entry rules, you are already doing better at trading. I would rate this sign a 9 out of 10.
But here’s a mistake that is easy to make. Writing down your exact entry rules is good and all, but when I was live trading in the early days, sometimes I used to get so immersed in the chart that I would take trades without even looking at my exact entry rules. I mean, what’s the point of writing down your rules if you are not even looking at them? That’s around the time when I started using a checklist. I wrote all my trading steps in that checklist and only took trades if I could say yes to every single entry rule. I also started writing my reasons for taking the trade before taking it. If my current reasons for entry matched my exact entry rules, then and only then would I take the trades. After doing this, the noise in my head, or the random thoughts, cleared up. This stopped me from taking random trades, resulting in better trading results. If you are writing down your reasons for taking the trade before actually doing so, you are on the right path! I would rate it 9 out of 10.
But all these rules are absolutely useless if you don’t know the win rate of your strategies! I think I got lucky in the early stages of my trading journey because I started backtesting almost every strategy I knew. The win rate data I got from those tests showed me the reality of trading. Most things I learned from the internet made me think I was going to make consistent profits from trading by clicking a few buttons on the screen. However, the backtesting data showed me that high win rate strategies with high-profit potential don’t exist. Most trading strategies have win rates that are closer to break-even. And because of that, you are not going to make a consistent profit every single month. But that was okay! Because backtesting strategies also showed me strategies that actually worked! With this data-backed mindset, I was able to manage my profit expectations, risk, and other things that massively improved my trading performance. If you know your strategy’s or entry rule’s win rate, you are doing better than 90% of traders. I would rate it 10 out of 10.
Okay, so the next sign is pretty straightforward. If you have taken more than 100 trades in the live market without making a sudden big loss or blowing up your account, you are doing way better than most traders. This indicates that you are most likely managing your money well and are in control of your emotions while trading. Even if you only focus on money management and emotional control, you will most likely never blow up your account. I would rate “taking 100 trades and still not losing a big portion of your account” as a 9 out of 10 sign that shows you are a good trader.
Now, if you are reviewing your trades from time to time, you are doing better than most traders. I think many people don’t do this because they are not sure if it’s going to help or not. But when I was a beginner, I used to take screenshots of all my trades and save them in win-loss folders. And then, from time to time, when I reviewed those trades, I started to see patterns in the winning and losing setups. When I began noting down the patterns or consistent reasons the trades were won and lost, I improved my exact entry rules. This was one of the best things I did as a beginner trader. I would rate it 9 out of 10.
But I think taking a screenshot of every single trade and storing them in separate win-loss folders was a bit of an extreme move by me. Normally, many traders track their trades using only an Excel sheet, something like this. I also did this while taking screenshots. In fact, I still track my trades in an Excel sheet, but nowadays, I mainly track the profit number, percentage, and profit graph. These three things give me most of the data I need to make decisions. But in my beginner days, I tracked the time of the trade, the date, the number of trades, the direction of the trades, the risk percentage on trades, the win rate, and then the profit number, percentage, and profit graph. If you are tracking your trades in an Excel sheet, you are definitely doing better at trading. But compared to other things, Excel tracking had less impact on my performance. I would rate it 7 out of 10.
But even if an Excel sheet as a whole had relatively less impact on me, there is one part of the Excel tracking that really helped. It’s the profit graph! It took me around a thousand hours of live trading experience to consistently break even in trading. Then, my profit graph more consistently started moving up. Even when there were bad days, and I lost large amounts of money, this profit graph helped me see things from a broader perspective. It showed me that even though there was a loss recently, it was still a small pullback on the entire graph. That helped me avoid revenge trading and thoughts that make you feel like you are not making progress in trading. If most traders who lose money saw their profit graph, it would look something like this: More sudden downward spikes as they lose most of their account on a few trades. If your profit graph is staying pretty much flat and doesn’t have sudden downward spikes, you are doing better at trading than you think. I would rate a flat profit graph 9 out of 10.
The next sign of being a better trader has to do with your mindset. As beginner traders, since we are not used to seeing the profit graphs of other, more successful traders, we are not really used to accepting losses in a year. But in reality, many professional traders have yearly losses even if they take a lot of trades. Many just don’t show them on the internet, probably because fewer people will buy their thousands of dollars of courses. Think of it like this: If you believe that trading is riskier than normal investing, then you might know that normal investing sometimes makes losses in a year, especially during a stock market crash. If safer investing can make losses in a year, of course, trading, which is much riskier, can easily make losses in a year, even if it’s profitable in the long run. Traders who have that long-term trading mindset are the ones who survive in the market better. If you are one of them, then you are doing better than most traders. I will rate it 8 out of 10.
The next sign is usually developed after you have gained enough experience in the market. You see, there are two kinds of traders in the market. On one side, we have traders who are happy with whatever return they get from the market. And on the other side, we have traders who will try to control the market. Even when their strategy is not providing good setups, maybe because the market conditions are not favorable, they will still try to aim for high-profit returns. This just leads to taking bad trades, and then the market shows who is the boss. That leads to losses, then overtrading or revenge trading, and eventually, quitting trading altogether. On the other hand, traders who only trade when the market provides an opportunity survive longer in the market. They survive long enough that when a very good opportunity arrives, taking that trade makes them big easy profits. If you are happy with whatever profit the market gives, you are doing better than most traders and will do fine in the long run. I will rate it 9 out of 10.
The next sign is one of the most important things that will keep your trading career alive. You see, people who started investing in the stock market near the start of the year 2020 saw their hard-earned money suddenly suffer a big loss as the stock market crashed. On the other hand, people who started investing only a few months later, just after the crash, doubled their investment within two years. I even saw a lady on the news channel who invested her entire savings when the market crashed and made more than a 300 percent profit from one or two stocks. Even though both groups of traders, the ones who started investing near the start of 2020 and the ones a few months later, were new to investing, the first group basically got unlucky. A similar thing happened to people who invested before the start of the 2008 market crash. Furthermore, there is something called a Black Swan Event. It’s a high-impact event that is difficult to predict but looks so obvious in hindsight. Like it or not, in the stock market, no matter how good you get at trading, at some point, you might face a Black Swan Event, or just be unlucky. If you have most of your capital in high-risk trading and are not diversified in safer investments, one black swan event can end your trading journey. If you are prepared for worst-case scenarios of the market, you are probably doing better than 99% of traders. I will rate it 10 out of 10.
The next sign has to do with your greed and other emotions. Let’s say you take a trade in the upward direction and set a good profit target like this. The price moves up and triggers your profit target. You are now happy. But then the price keeps moving upward without you. You have missed some profit! If someone regrets booking profit at this stage, then that’s a sign of a beginner trader who is making decisions in hindsight. Your trading journey will be filled with greed and fear. But if you are making decisions based on those emotions in hindsight, that’s a big mistake. On the other hand, a better trader makes most of their decisions based on proven data. They calculate when they are going to exit even before taking the trade. Whatever happens after that doesn’t matter most of the time. If you are not a hindsight trader, then you are doing better at trading! I would rate it 7 out of 10.
The next sign has to do with how much profit you are looking to make from a single trade. We all do this in the learning stage of trading. We take a trade, set a very small stop-loss, but then set a big fat profit target. We think that since the profit is so huge, taking the trade with a small risk is fine. If we keep doing this, at least one trade should make a profit, right? But that’s wrong thinking. Sure, sometimes there are really good opportunities that can give huge profits. But if you always trade like this, the probability of the price reaching that big profit target is very low most of the time, like less than 1%. A trader is more likely to blow up the account before getting that lucky. If you don’t set big fat profit targets like this, you are doing better at trading. I would rate this sign a 7 out of 10.
The next sign has to do with how you feel while trading. Tell me, do you feel bored while taking trades? Or do you get excited every time you look at a chart? Since trading is like running a business, with all the rules we traders have to stick to, traders should be bored most of the time. I remember someone saying to me that now that they were doing better at trading, everything felt so pointless. They didn’t enjoy trading anymore. But that’s exactly how it’s supposed to feel like! If you feel bored, you are gold! You are doing better than you think! I would rate this sign a 9 out of 10.
The next sign has to do with how you move your stop-loss. After taking a trade, if you make the stop-loss bigger when the price comes near it, that’s someone thinking with emotions. On the other hand, if you only move the stop-loss in the entry direction, then you are doing better than beginner traders. I would rate this sign a 7 out of 10.
The next sign has to do with how much profit you are aiming to make in a year. Most of us get attracted to trading with a get-rich-quick mindset. And that’s okay! After all, trading is often advertised as such. But a better trader soon realizes that many people who got rich quickly from trading were at the right place at the right time, like that lady I talked about earlier who made 300 percent profit by risking her entire savings on a few stocks. There is a very low chance of getting rich quickly, but there is a higher probability of getting rich in the long term. There is a saying that goes something like, “We humans overestimate what we can do in a year and underestimate how much we can achieve in a decade.” If you think like this, you are doing better than 90% of traders. I would rate it 9 out of 10.
The next sign has to do with what you have on your trading chart. If the indicators on one’s chart keep changing frequently, then they are still trying to figure out a working strategy. Nothing wrong with that! I mean, I tried all popular indicators before finding the ones that actually worked. But if the indicators on your chart stay pretty much the same, you have most likely found a reliable strategy. That’s a sign of a better trader! I would rate it 7 out of 10. I rated it on the lower end because, since markets don’t stay the same forever, it is normal for your strategies or indicators to evolve over time. A better trader will adapt to the new market conditions. I would rate adapting to the market a 10 out of 10. It is very important if you want to survive in the market in the long run.
That’s all!
