How Successful Traders Think and Trade
- The skill sets that work in an ordinary business venture are not necessarily useful in trading. Don't assume that success in other field like a profession, or good returns from other types of investments like property, will automatically lead to success in the stock market. Ironically, some of the worst share investors and traders are often those who are the most educated in their 'normal' lives. A reason for this is that response from the stock market is mixed: even if you always stick to the rules of your trading system, you will still end up winning on some trades and losing on others. This is inevitable and is as true for the best, most senior traders as it is for the novice. Most people are used to getting the same, not different, results from doing the same thing. But this does not always happen in CFD trading. For instance, being wrong is something that we are conditioned from a young age to feel bad about but this present serious problems when trading. The goal in trading contracts for difference should be first and foremost to preserve capital and second to come out ahead on average. Thing is we don't know in advance which trades will end up making money. What we do need to know in advance is exactly under what conditions should we enter or exit a trade.
- The key to successful trading is to keep it simple, consistent and be disciplined. If you are a technical trader stick to the indicators that you know best. Discipline is one of the most important characteristic of the professional contracts for difference trader. This is the one thing that separates the traders that make money consistently and those that don't.
- A common characteristic of successful CFD traders is that they all stick to a strategy of taking profits while cutting losses. These CFD investors incorporate losses as a cost of doing business and prefer to take a number of small losses rather than keep a position open in the hope of a recovery. In that way they are always in control of the downside of every trade.
- Any strategy no matter how sound will not work for everyone, the psychological barriers of trading is the real dark area and the hardest part to train yourself in, and I'm not even sure everyone can do so... Two tricks I use is to not look at my cash position when in a trade, and quite often I'll bugger off and leave my trade with limits and stops, watching every tick would make me madder than I already am!
- Don't punish yourself when you get it wrong; this is not only negative by itself but it will erode your confidence for future trades. And don't immediately try to seek what went wrong after a losing run; that is better done in a much cooler moment.
- Having a positive attitude and a reasonable ability to deal with figures definitely helps. This will allow you to make decisions rationally and in enough time to take advantage of the normal market movements.
- There is no shortcut to becoming a master trader and the best trader is still learning as trading is a lifetime process of learning and the best traders are still making mistakes so the best way to speed the learning process is to find a good trader who is willing to show you the way and to trade with him 24/7 - if you could be so lucky to find him! The more realistic way is to learn from mistakes and not to repeat your mistakes. Remember that in 2008 many traders were caught out during the global market falls, with falls so extreme that even stop losses were caught out. Successful traders never stop learning...
- Apart from that reading books; gaining knowledge in reading charts, technical analysis and fundamental analysis are also helpful but ultimately having the ability to control your emotions instead of letting emotions controlling you is the key to success and that takes time to develop and depends on what sort of person you are to begin with; with many trading tools on our disposal and sufficient capital and enough practice we can deal with our emotions better as we know we have the knowledge and skills at the end to deal with any situations that the market is throwing at us.
- A classic error is people putting funds on a margin-based account, to test it all out. 'I don't mind losing when I start out.' Well, you bloody well should! No one deep down in their heart puts his life-savings in a CFD trading account not minding about losing, they are doing it to win and when they don't they put it down as 'learning'. Back to Chapter 1: Denial.
- Why are you trading? Most people who trade do so with the ultimate goal of making a profit. However, there are some people for whom trading is a leisure activity, either consciously or unconsciously. If you are participating in the market to make a profit, it is crucial that you consider trading as a business. People that trade for entertainment, or to impress their work colleagues or friends will be lucky to breakeven, let alone make a gain. Don't view yourself as a serious trader if, in fact, you are simply seeking entertainment.
- How long does it take to be successful? How long does it take someone to play the piano? The how long question is impossible to answer; everyone will be different. I never thought of the first two years as survival. I thought about them as years I was learning and developing, which I think is a more positive approach... It is said that novice traders turn into professional stock market traders when they cease trying to find the Holy Grail and focus on controlling risk.
- Do have other interests besides trading! One of the benefits I have found of trading is my guitar playing is coming in useful! Once I am in a trade I like the distraction of doing something else rather than watching every tick and too, whilst waiting for a setup to happen. Because I only trade a couple of setups I do find I have a lots of time which could get me into trouble with overtrading if I have nothing else to do. And last but not least don't trade if you are upset or if picking up your kids from school is likely to get in the way of the objective!
- All rules are meant to be broken. The trick is knowing when and how infrequently this rule may be invoked!
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