The principles in Tharp’s book “Trade Your Way to Financial Freedom” haven’t changed since it was first published, but there are new factors that need to be considered. With energy and mining stocks remaining buoyant, the Ukrainian conflict still rampant and questions over how the Bank Of England will respond to inflation dictating the UK stock markets in 2022–it is important for traders who follow a trading strategy to make sure their approach continues to reflect guiding lights like these.
1) Develop a trading system with an edge
When it comes to developing a financial trading system, it is important to have an edge. This means that your system should have some kind of advantage over the market. It could be a technical indicator that you have developed, or a fundamental analysis strategy that you are particularly good at. Whatever it is, make sure that your system has an edge.
2) Stick to your system
Once you have developed a system with an edge, it is important to stick to it. This means following your rules and not deviating from your plan. Even if you are having a losing streak, sticking to your system will pay off in the long run.
3) Manage risk
Risk management is another important consideration. When trading, you should always be aware of the risks involved. Make sure to use stop-loss orders and limit your exposure to risk.
4) Use position sizing to protect your account
Position sizing is another important tool for risk management. By varying your position size, you can control how much risk you are taking on. This will help to protect your account from losses.
5) Focus on making money, not on being right
When trading, it is important to focus on making money, not on being right. This means that you should be more concerned with making a profit than with being right about the direction of the market.
6) Think probabilistically
It is also important to think probabilistically. This means that you should not be 100% sure about anything when trading. Instead, you should be prepared for the possibility that your predictions may be wrong.
7) Have a realistic and well-defined trading plan
Having a realistic and well-defined trading plan is also important. This means that you should have a clear idea of what you want to achieve with your trading. Your plan should be based on your edge and your risk tolerance.
8) Follow your rules
Following your rules is also crucial. This means sticking to your plan and not deviating from it. Even if you are having a losing streak, following your rules will pay off in the long run.
9) Review your performance
Reviewing your performance is also important. This means that you should periodically check how your system is performing. If it is not performing well, you may need to adjust your rules or your trading plan.
10) Take responsibility for your results
Finally, it is important to take responsibility for your results. This means that you should not blame the market or anyone else for your losses. Instead, you should accept responsibility for your own actions and strive to improve your trading.
By following these principles, you can trade your way to financial freedom in 2022. By sticking to your system and managing risk, you can make a profit even in a volatile market. So, don’t delay, start trading today!