It’s no secret that us traders love our price charts.

For many of us, chart analysis is the cornerstone of what we do.

It’s how we get a read on the markets, determine where the best opportunities lie, and figure out how to take advantage of them.

That’s why what I have to say today might surprise you…

And that message is that knowing how to read a chart is not what’s going to make you money as a trader.

When it comes to my own trading, analyzing a chart is actually the least important part of the process.

That’s because no matter how good you are at market analysis; you can never know for sure what the market is going to do next.

Here’s How You Make Money

There’s always an unknown variable when it comes to trying to predict the future.

It’s true that chart reading can give us an edge, but that’s not enough to be a consistently successful trader.

You don’t make your money from the charts. You make money because of how you manage risk and stay in control of your emotions.

Think of it like this…

Chart analysis is just like putting an address into your GPS before you head out on a long road trip.

This part of the process is easy. You simply figure out where you’re going and how you’re going to get there.

But you still have to do all the hard work of sitting behind the wheel, paying attention to traffic, and taking the right turns at the right time.

Trading really isn’t any different.

Reading a chart is the trading equivalent of putting an address into Google Maps.

It’s great that you’ve identified a possible target or key trading level. But that doesn’t get you to your final destination, which is hopefully a profitable trade.

You still have to actually place the trade, which means you have money at risk. And when we have money at risk, we become emotionally invested in the trade as well.

And when we’re emotionally invested, we tend to make mistakes.

The solution to all this is very simple. We have to systematize our trading as much as possible.

In other words, our trading should involve as little human discretion as possible.

The Worst That Can Happen

For example, one systematic step I love to take with my own trades is eliminating my risk once I’m up 100% on a trade.

So if I’m risking $500 on a trade and I have an open profit of $500, I’ll move my stop loss to my entry point.

Now the worst thing that can happen is I don’t lose any money. And the best case scenario is that I exit the trade with a nice gain.

The key to this strategy is that I know exactly what I have to do before I even get into the trade. This makes managing my risk a lot easier.

Let me know if you have similar risk management strategies you use with your trading.

Or if you disagree with me entirely, that’s okay too! Either way, I’d love to hear from you. Write me at feedback@jeffclarktrader.com.

Happy trading,

Imre Gams
Analyst, Market Minute