“It takes a lot of showing up for you to be lucky” – Kristia van Heerden.

If you are a trader, this is a concept you need to familiarize yourself with.

When placing a trade, you have no idea whether that particular trade will be a winner or a loser. And you certainly don’t need special skills to be on a losing or winning trade. All you need to know is your trading system’s probabilistic edge over a series of trades. Unfortunately, this is something most traders battle with. In some cases it’s forgetting that you’re dealing with probabilities. In most cases it’s the euphoria after a couple of consecutive wins.

Let’s break it down

Every trade has 1 of 5 possible outcomes:

• Big winner
• Small winner
• Break-even
• Small loser
• Big loser

Your job as a trader is to limit the likelihood of a big loser. All my big losers came from being euphoric. When you step into that euphoric state, your mind tells you to bet big because “you know this trade will be a winner, otherwise you wouldn’t be placing the trade”. I can assure you, it’s not true.

The same applies to winners. It’s not possible to know if a trade will be a big winner. But you have to place the trade to find out. It’s going to take a lot of showing up to find that big winner. And it’s going to take placing as many trades as possible, to find a fit within your edge/system.

You need to survive the losses

Even with a ‘high probability’ – a 70% hit rate for example, you still need to live through 30% misses – and the distribution between hits and misses is random. Taking the above example, there’s no way of telling how the 30% will be distributed. Even when you miss three out of the 10, it doesn’t mean the next event is the start of your winning streak. A 30% miss rate could also mean six misses out of 20 trades. You have to take the trade to find out.

Small winners and small losers are more likely to occur. This is especially true for trend traders because markets generally spend more time in ranges than in trends. There’s no amount of technical analysis that can guarantee a break-out to a trend.

You will often find yourself in ‘fake trends’ that end quickly, either in a small loss or a small win. How small is small? How big is big? It depends on your risk management strategy.

Don’t bet the farm

It takes having capital in your account to show up for every potential trend. If you bet the farm every time you show up, it won’t take many consecutive losses to wipe out your account. And then you won’t be around for the big winner. Betting a small percentage of your kitty gives you a bigger chance to show up for the big winner that comes from time to time.

In my view, one of the most important skills to master for consistent profitability, is the discipline to show up and execute with precision on every trade.

That’s why I approach every trade as follows.

• Wait for my buy/sell signal;
• Wait for the signal to confirm;
• Place a stop loss at a logical level when placing a trade. The ATR tells me where that is;
• Size my bet (position size) to only expose 2% of my portfolio to that trade;
• Monitor the closing prices daily;
• Exit the position when my trailing stop loss is triggered; and
• Record the trade in my trading journal.

Most importantly, I have to show up, on time, for each trade that fits my criteria. If I show up enough, that lucky trade that becomes a big winner will find me.

Traders share a peculiar characteristic: they’re fiercely competitive, but only with themselves. In practice this means that they see every outcome as an opportunity to learn, and they’re brutally honest about both their failures and successes. This also means that they’re hungry for knowledge. They don’t sleep easy with unanswered questions. And they’re seldom satisfied with just one answer.

Njabulo Nsibande is a founder of Village Trader, and Sakha Ingcebo investment club. His interest in trading began in 2016, alongside a rash of Instagram ‘fx traders’…

Find him on Twitter: @njabulo_goje.