As you probably know, Napoleon Hill wrote the classic How to Think and Grow Rich to help anyone become financially rich. The lessons in this book are priceless, timeless and valuable at any point of your life.
This post is an adaptation of the 13 principles or steps talked in the book that can be applied to your trading business anytime regardless of your skill level.
Step 1: Desire
“Wishing will not bring riches. But desiring riches with a state of mind that becomes an obsession, then planning definite ways and means to acquire riches, and backing those plans with persistence which does not recognize failure, will bring riches.”
According to Napoleon Hill, everything starts with a burning desire to get somewhere, to be somebody. The desire to becoming a trader must be bigger than anything else you want to accomplish and must be your number one priority. When I started trading at a proprietary desk, I used to see the vast majority of traders come and go as soon as the market closes. If you have better things to do aftermarket, your burning desire to become a trader is not there.
Step 2: Faith
“Whether you think you can, or you think you can’t – you’re right” – Henry Ford as quoted in the book.
There is no point of continuing any endeavor in life if you don’t believe in it or in your ability to get there. Faith is critical to anyone that wants to become successful in trading. Whether to make $500 a day or 8 figures, you must have faith in yourself, regardless of how many losses you must overcome as a trader. There will be more than a bump on the road, most people give up after a blown account, but you have to continue to believe in yourself.
Step 3: Auto-suggestion
Here, the book introduces the principle of affirmations. Repeat to yourself how successful you’ll become until it becomes a reality. I am a successful trader, I am a successful trader, I am a profitable trader. I make money consistently. I am…Repeat until you wake up and go to bed with these affirmations in your head. You can also practice creative visualization, another powerful technique that I have particularly used to achieve my goals.
Step 4: Specialized knowledge
You can get your 10 thousand hours in or you can get specialized knowledge, but better to do both. It’s up to you how you spend your time, but if you want to reach unimaginable goals, you must be an efficient learner. Many people start trading attacking all fronts. Futures, forex, equities, options, swing, day trading, scalping… They try them all. That’s a not a bad thing as long as you don’t get stuck for years trying these instruments/strategies with no clear winner to focus on. Get focused on what your personality adapts better and learn all about it. Scalpers tend to be young, financially ambitious and aggressive. Swing traders tend to be older and more conservative. Find a strategy that fits your personality and specialize in it. If you are a beginner, remember that your trading account is getting lower almost on a daily basis. You have no time to waste here.
Step 5: Imagination
It feels great to find a trading edge and scale it to its full potential, but you should always be thinking of new ways to beat the market as your edge can go away at any moment. Try to find/test new strategies with small quantities and always log your results to make sure they have potential. Your edge can go away at any moment. You have to be constantly finding new ways to keep up with the market. Trying new tools is another way to keep your imagination and creativity levels up.
Step 6: Organized Planning
How are you going to become a successful trader? Do you have a plan? It can’t be trading from 9-to-5. It can’t be scalping or day trading. It needs to be very specific. It needs to be structured into a set of actions that can be repeatable and quantifiable so that you know how well you are doing.
“Most of us are good “starters” but poor “finishers” of everything we begin.”
That’s where a mentor or getting properly educated can help you organize your path to success.
Step 7: Decision
Decision making is at the core of the trading profession. You can’t become profitable if you can’t make decisions quickly. No one can. Here is how Napoleon Hill puts it:
“People who fail to accumulate money, without exception, have the habit of reaching decisions, if at all, very slowly, and of changing these decisions quickly and often.”
Step 8: Persistence
“Riches do not respond to wishes. They respond only to definite plans, backed by definite desires, through constant persistence.”
To me, this is the most important step in achieving profitability. You must pay your market dues, you must suffer through the process, you must learn how to cope with the pain of losing and still push forward. Losses are common in the beginning, but then if you persist long enough, you stop losing. Then you breakeven, then you become profitable, then you become consistently profitable. This is the path to anyone that starts, but you have to persist no matter what. If you blow up your account, start trading cfds with less than $100 bucks. Your strategy stopped working? Go back to the basics trading 1 lot or 100 shares. The market can’t beat you, if you never ever quit.
Step 9: The power of the mastermind
One of my 5 pillars to trading success is to form a group of like-minded individuals who want to achieve your very goal or is already up there. You need to be around people that are going through the process and emotions with you. Trading is a very lonely profession and doing it alone is hard, not to mention, it can take a big toll on your social/emotional intelligence. Be around traders! Join a meetup, start one.
Step 10: Sex Transmutation
Sex is one of the most powerful human desires, but the energy involved in having sex can be put to better uses. Napoleon Hill is not suggesting abstaining from sex, but to use some of the energy involved in thinking/practicing the act of sex to achieving your financial goals. The first law of thermodynamics is clear about this. Energy cannot be destroyed, it can only be transferred. Transfer some of your sexual energy to your trading business to achieve better results.
Step 11: The power of the subconscious mind
“The subconscious mind will not remain idle! If you fail to plant desires in your subconscious mind, it will feed upon the thoughts which reach it as the result of your neglect. Positive and negative emotions cannot occupy the mind at the same time. One or the other must dominate. It is your responsibility to make sure that positive emotions constitute the dominating influence of your mind.”
Here, Napoleon Hill recommends thinking positively regardless of the outcome. It’s hard to quantify your thoughts, but you must be aware of them as much as possible to identify negativity in your thoughts and eliminate them. Are you jumping on a trade and immediately thinking it’s going to turn against you? You should never get into a trade thinking like this. Try the opposite. But be persistent and make it a good trading habit. Don’t let negativity get in the way regardless of the outcome of the trade.
Step 12: The brain
“Every human brain is capable of picking up vibrations of thought which are being released by other brains … The Creative Imagination is the “receiving set” of the brain, which receives thoughts released by the brains of others.”
This is another step that demonstrates the importance of being around other successful, smart and competent traders.
Step 13: The sixth-sense
Trust your gut or trust your soul. Trading is so demanding that mind, body and soul must be aligned to achieve success. It ties well with the first step of the book. Anything starts with a desire, but you must trust your gut, your sixth-sense that trading could be a profitable career for you.
Bonus steps for Traders
Enjoy the process
Become a trader for the right reasons. You must enjoy the process more than the results… You must enjoy the grind, the charts, the tape, the losses, the wins and everything in between. Becoming a trader because you want to be rich or because you don’t want to have a boss are nice to haves, but are not enough. Passion for the markets will.
You can`t be a trader if you don’t learn from your mistakes and stop making them. You can follow all these steps, but if you keep making the same mistakes over and over, you won’t get very far.
As you can see, the steps are not that hard to understand, but the execution is everything. Only the very top can put these steps into work in a way that turns the wheels in their favor.