Forget the flashy, overhyped tips you hear about these days online. Instead, here, we will explore brutally honest strategies as shared by an expert trader from one of New York City’s leading proprietary trading firms. By focusing on real-world insights, we will cover the three most critical steps to grow your trading account. If you are tired of struggling with inconsistent results, this guide is for you.
Step 1: Start with Edge
Why Edge Matters More Than Psychology
When starting out, most traders obsess over psychology. But here’s a hard truth: mindset isn’t your biggest problem in the early stages. Your primary focus should be on building trading edge—a strategy or set of strategies that consistently generate profits.
What is Edge?
Edge identification refers to the specific trades that exploit market inefficiencies. Instead of blindly trading wedges or consolidation patterns, learn why those patterns work. In the words of the Masters, ask yourself these questions:
- What market behavior does this trade exploit?
- Why does this trade have an edge?
Like a sushi chef learning innovations from experienced masters, new traders must learn successful trading strategies. Instead of reinventing the wheel, focus on proven techniques used by experienced traders. Understand their tools, why they work, and how to adapt them for your use.
Once you have learned these fundamental plays, you have a portfolio of trades with well-defined, repeatable edges. You can then scale and hone your play to long-term perfection once you know why you are doing so well with a particular trade setup.
Step 2: Classify Your Trades
Classifying Your Trades: A, B, and C
In order to control your risk, classify your trades as A, B, or C grades according to their quality:
- A Trades: High-probability, high-reward setups with all favorable variables present.
- B Trades: Reliable trades with marginally weaker setups or fewer supporting factors.
- C Trades: Average setups carrying higher degrees of risk.
Why Sorting Matters
By sorting these trades, you’re better positioned to put your money where your probability of success is greatest. A-trades should get the most capital because they’re more likely to work. In contrast, while B and C-trades are integral for establishing consistency, they need to be smaller positions.
Practical Expectations for Trade Frequency
On average, traders make 120 trades a month, distributed as follows:
- 20 A trades
- 40 B trades
- 60 C trades
Because A trades are rare, you need to act very differently with them than you do with B and C trades. B and C trades offer steady income and help you develop skills in larger, riskier trades.
How to Label Your A, B, and C Trades
To classify your trades, examine 20 samples of the same trade. Rank them from best to worst:
- The strongest examples become your A trades.
- The weakest examples (without losing edge) are your C trades.
- Everything in between is a B trade.
This process helps explain where each trade falls on the risk-reward spectrum and helps build a framework for consistency.
Step 3: Update Your Trade Size
Why Risk Sizing is Important
Once you know your trade categories, the next step is to allocate risk appropriately. The objective is straightforward: bet bigger on high-probability setups and keep the risk low on weaker trades.
Risk Sizing Guidelines
Here’s a general risk allocation strategy based on a $10,000 daily stop-loss limit:
- A Trades: Risk 30% or more of your daily stop ($3,000).
- B Trades: Risk 10–15% of your daily stop ($1,000–$1,500).
- C Trades: Keep risk under 5% of daily stop ($500).
This also means that the majority of your capital will always be concentrated in A trades. In that way, your losses on B and C trades are kept very manageable.
The Significance of Sizing Properly
Many losing traders overbet into crap setups (C trades) and underbet into the good ones (A trades). This results in lost opportunities and unnecessary losses. Instead, consistently execute smaller B and C trades to build confidence and experience while saving your big bets for A trades.
The Secret to Consistency
Successful traders aren’t being hit with more opportunities than anyone else. They just execute their trades better. They:
- Take fewer, smaller risks on C trades.
- Invest middling amounts into B trades for growth that’s stable.
- Put their best bets into A trades, which constitute the majority of their returns.
By concentrating on this strategy, it would avoid overtrading and provide a secure base for growth.
Conclusion
Growing your trading account is about more than luck or flashy strategies. By focusing on edge, categorizing trades, and adjusting trade sizing, you’ll create a disciplined, repeatable process for success. Start small, master B trades, and be ready to scale up when those rare A trades come your way.
If you want to dive deeper, consider tools such as risk sizing scorecards to track your trades and hence maintain consistency. Remember, the path to consistent profits isn’t about chasing every opportunity—it’s about mastering the right ones.