Trading is a bit of an emotional roller coaster! You will have great days when you are on cloud nine and other days when you feel that the whole world has contrived to be against you. Sometimes important news will affect the market and help you or destroy a good position. Fund managers can suddenly place a lot of money in the market and affect prices.
The secret to success is learning how to manage risk and manage emotion when trading… Firstly, random stock selection or ‘gut feel’ is not a strategy that makes money. Secondly, emotion is the enemy. A system with rules about buying and selling helps to remove emotion away from your trading decisions. Thirdly, disciplined risk management is the single most important ingredient in a trading environment – Brian Pozz, Retired Business Entrepreneur and CFD Trader.
All this is part of trading and you HAVE to accept it. There will be times when it goes in your favour and you will be more than happy to accept it then. You must concentrate on your strategy:
- How well are you trading it (sticking to it)?
- How well does it do over time? I suggest at LEAST a month of trades and probably longer.
Remember, you WILL have losing trades – that is part of the game and you need to accept them then analyse them to see if you can learn anything. One of the great things about trading is that you never stop learning.
You will learn a lot about yourself when trading and this can be a good thing or you might not like what you learn and decide to give up. You will learn that you cannot fight the market and expect to win. You need to get to the position where you work in harmony with the market.
The market is not a good teacher. Trading goes against many of our natural instincts. We like to be RIGHT! This means you will let your losses run, expecting them to turn round and you will take your profits early in case they turn round and become losses. This is exactly the opposite of good trading practice.
The market will teach you patience, humility and self-control. You will learn about optimism and pessimism, your attitude to risk and the gap between who you are and who you think you are. You will need to correct your weaknesses and build on your strengths.
But it is all worth it! Trading is a great hobby and an even better way to earn a living. I cannot think of any better way!