When it comes to doing anything in life, failure is a natural part of the journey. Learning from failure helps us improve and adapt to constant change. Failing over and over gives us the opportunity to find our adaptive edge—the one that lets us grow over time.
The markets are no different.
Becoming a consistent and profitable investor or trader is easier said than done. The market is always changing, and yet, oddly, it remains the same in so many ways. To succeed in the market, you only need to follow three simple steps that most people either overlook or struggle to commit to. They sound easy, but in practice, they can be challenging—so I’ve also added helpful tips within each step.
Here are the 3 core steps:
- Define your edge
- Manage your risk and emotions
- Build and follow a routine
Step 1: Define Your Edge
So, what does it mean to define your edge?
I define it as a repeatable set of conditions where you make more than you lose. Think of it like your personal trading blueprint—a strategy with a high probability of success that fits your personality and goals.
We’re only going to briefly touch on how to build a strategy here, so if you want a deeper dive, check out my article on Developing a Winning Trading Strategy.
There are endless ways to find an edge. At its core, it’s about testing different combinations of techniques and indicators to figure out:
- What assets to trade
- Where and when to enter
- Where to place your stop loss
- Where to take profits
Most experienced traders blend visual tools (like chart patterns) with quantitative tools (like indicators) to form a setup that suits them best. But before you can do that, you need to understand yourself first.
Ask yourself:
- How long do I want to hold positions?
- How often do I want to trade?
- How many trades can I realistically manage in a day or week?
- Am I more visual or analytical? Or a bit of both?
Once you have some clarity, you can start testing strategies that align with your style. Here are a few common and proven techniques that traders use:
- Pattern recognition: bull flags, head and shoulders, triangles, breakouts
- Volume anomalies: big volume during price consolidation
- Time-of-day setups: opening range breakouts, VWAP reversals, pre-market fades
- Fundamental catalysts: earnings, macro news, economic data
- Statistical edges: back tested setups with high win rates
The next step is testing. Use charting platforms like TradingView (freemium), Tradesim (paid), or TrendSpider (paid) to simulate trades. If you’re just starting out, go with free charts and manually draw entries, exits, and stop levels. Focus on tracking your results and journaling every simulated trade.
Once you’ve got something that works, move to paper trading—trading real-time market conditions using fake money. Most brokerages offer this, and it’s a powerful step before going live.
And now for a quick shameless plug…
When it comes to chart pattern recognition, it’s traditionally been a manual job—until now. My tool, VisualizeTrades, is a real-time chart pattern recognition software that automatically identifies patterns as they form and includes suggested stop losses and profit targets. If you struggle with spotting patterns or sticking to your plan, give it a try linked here.
Step 2: Manage Your Risk and Emotions
Out of all three steps, this is by far the toughest—especially in the beginning.
We all bring emotional baggage into trading. Whether it’s fear, greed, doubt, or frustration, these emotions can cloud your judgment and lead to poor decisions. Some of the most dangerous biases are the ones we don’t even know we have.
Here are a few of the usual suspects:
- Fear of missing out (FOMO)
- Confirmation bias
- Revenge trading
- Overcompensation
- Overconfidence
- Analysis paralysis
Over time, you’ll build awareness and experience. This step becomes easier when combined with steps 1 and 3: having a strategy and a routine gives you something to fall back on when emotions run high.
Now let’s talk about managing risk.
Risk tolerance is personal, but risk management techniques are universal. One of the most common approaches is using a reward-to-risk ratio (often written as R:R). A good starting point is 2:1 or 3:1. That means you’re risking $1 to potentially make $2 or $3.
Example:
Let’s say you buy a stock at $10. If you’re using a 2:1 R:R, your stop loss would be at $9 and your profit target at $12. With a solid strategy, the idea is that price hits $12 before it hits $9 more often than not.
Every trade should have at least two exits:
- A stop loss (if price goes against you)
- A profit target (if it goes your way)
Advanced traders often use multiple profit targets, scaling out as the price hits new levels. For example, sell half your position at target one, then hold the rest for target two. This helps lock in gains while still leaving room for upside. Alternatively, some go all-in on a bigger target—this is higher risk, but can pay off if volume and momentum are in your favor.
Now let’s get back to emotions.
Fear and greed can cause you to break your own rules. You might stay in a position too long, fail to take profit, or freeze and do nothing when you should act. Awareness is your best weapon.
Here’s the truth: you’re not always going to feel great. But having a clear plan and process will help you act anyway.
Here’s where journaling comes in. Writing down your trades (or even doing voice notes) gives you something to reflect on. Patterns will emerge—not just in price action, but in your own behavior.
One last warning: chasing trades is one of the easiest ways to destroy your risk/reward. When a stock suddenly rips in your direction and you didn’t catch it, you’ll be tempted to jump in late. That leads to bad entries, over-leveraged positions, and skewed risk.
Then comes the revenge trade—trying to make up for the money you just lost. That can lead to overconfidence, ignoring your edge, and blowing up your account.
Trust me. I’ve been there. I’m telling you this to help you avoid that spiral and if you are curious to learn more check out our article on The 10 Most Common Mistakes Traders Make and How to Avoid Them.
Always live to trade another day.
Step 3: Build and Follow a Routine
Out of all three steps, this is the most straightforward. But don’t mistake “easy” for “unimportant.” Your routine is what turns skill into consistency.
You’ve built a strategy. You’ve learned how to manage risk. Now it’s time to build the structure around your process.
Start by creating a daily trading schedule based on your goals and available time. Set times for:
- Market prep (news, catalyst review, watchlist)
- Scanning for setups
- Executing trades
- Journaling and reflection
Before each session, check in with yourself:
- Did you sleep well?
- Are you in a focused headspace?
- What’s your general sentiment?
- Are you sticking to the plan or just winging it?
During each trade, follow a checklist:
- Does this trade match your edge?
- What’s your entry?
- Where’s your stop?
- What’s your profit target?
- How are you feeling right now?
After each trade, if you’re short on time, record a voice memo or jot down a few notes. Then reset for the next opportunity.
Then… rinse and repeat.
Over time, this routine becomes second nature. And once it does, it becomes your biggest advantage.
Final Thoughts
Trading success isn’t about finding the holy grail—it’s about showing up every day with a plan, managing risk, and being honest with yourself.
If you can define your edge, manage your emotions, and stick to a routine, you’ll put yourself in the top few percent of traders who actually make it.
Every trade is a lesson. Every mistake is feedback. Stay humble, stay focused, and above all—stay in the game.
Stick to your plan. Trust your process. And live to trade another day.