Becoming a successful trader is no small feat.

It requires discipline, a keen understanding of market dynamics, and the ability to refine your approach. If you’re tired of the fluff and looking for actionable trading advice, this is for you.

By the end of this article, you’ll understand three critical steps to transform your trading journey: identifying your edge, categorizing your trades, and optimizing your risk.

Step 1: Start with Edge

When you’re starting, trading psychology isn’t your biggest problem. The truth is, focusing on your mindset before developing a solid strategy is putting the cart before the horse. What you need to zero in on is a trading edge.

What Is Trading Edge?

An edge is a repeatable, definable market behavior or inefficiency that you can exploit. It’s not just about recognizing patterns like wedges or consolidations but understanding why those trades work. What causes the market behavior? Why is this inefficiency present? These are the questions you need to answer to uncover your edge.

Learn From the Masters

Much like a sushi chef who trains under sushi masters to hone their craft, you should learn from traders with proven edges. Study their tools, their setups, and the reasons behind their success. Once you’ve absorbed the foundations, you can make slight adjustments to suit your style.

Instead of chasing random strategies or setups, focus on trades with clear reasons for their existence. This understanding will help you find more trades with real edge, setting you apart from traders who merely imitate patterns without context.

Step 2: Categorize Your Trades

Now that you understand edge, it’s time to categorize your trades into A, B, and C trades. This method ensures you’re aligning your risk with the quality of the setup.

Breaking Down Trade Categories

• A Trades: The best of the best. These setups have the highest probability of success with all variables aligned
• B Trades: Solid setups, but with a few less favorable conditions
• C Trades: Mediocre trades with weaker edge. These should involve minimal risk if taken at all

A typical month might look like this:

• 20 A trades
• 40 B trades
• 60 C trades

How to Identify A, B, and C Trades

• Gather 20 examples of the same trade type
• Identify the best version (A trade) and the worst version (F trade)
• Rank the rest on a scale between A and F
• Anything below a C trade? Don’t trade it

By focusing on A and B trades, you’ll not only reduce the frequency of losing trades but also build confidence and consistency.

Step 3: Size Your Trades Properly

Now comes the crucial part: risk management. To maximize your profits, you need to allocate risk appropriately across A, B, and C trades.

Risk Sizing Guidelines

• A Trades: Risk 30% or more of your daily stop. These are your big opportunities
• B Trades: Risk 10–15% of your daily stop. Consistent execution of B trades forms the foundation of your monthly P&L
• C Trades: Risk less than 5%. Treat these as learning opportunities or setups with minimal risk

Example

• A Trades: $3,000
• B Trades: $1,000–$1,500
• C Trades: $500

Why Sizing Matters

Over-allocating risk to C trades and under-sizing A trades can sabotage your P&L. Successful traders understand that most of their profits come from a handful of A trades monthly. They build their baseline through consistent execution of B trades, reserving significant size for those rare, high-probability setups.

Key Takeaways for Developing Traders

• Cut Out Mediocrity: Eliminate trades with a weak edge (anything below a C trade)
• Focus on B Trades: Consistency in B trades builds experience and confidence, paving the way for successful A trades
• Risk Smarter: Align your risk with the quality of the trade. Save big bets for A trades and treat B and C trades as building blocks

Next Steps: Master Your System

With the right tools, focus, and discipline, you can become a consistently profitable trader. Remember, trading is a journey, and mastering the fundamentals is the first step toward success.