4. Work Hard at Learning How to Trade Properly and Keep Working:
This is no different from any other trade. Would you expect to become a brain surgeon after attending a week-end seminar and reading a few books? Yet, why do so many people expect to become a Market Wizard within such a short period of time?
If you ever have the privilege to ask questions to a successful trader you'll realize just how much effort, time, determination and lost money it took until they arrived at where they are. Being a consistent stock market winner is no different from being a top lawyer, Doctor or businessman.
First you must decide that you really do want to trade. Ask your-self is trading the stock market something I am genuinely interested in or are you lured by the potential money it has to offer you? I always remember reading a book called " Grow Rich With Peace of Mind" Napolean Hill. Whilst interviewing the top people in a number of professions he came to the conclusion that these people loved their chosen fields. They would have done it for no money. Trading is the same. If your number one goal in trading the markets is simply to make as much money as possible then I doubt you'll make it into the super trader status. If you are simply chasing the money it can be a motivation as long as you are motivated to learn and work at what really works in the market and NOT keep chasing the latest hot new trading idea that exploits peoples love of money to make them act.
August 25, 2010
7 Habits Of A Highly Successful Trader (3 of 7)
3) Plan a Trade and Trade a Plan:
Without doubt, no trader will last long if he doesn't plan every trade. But there is absolutely no point in making a plan for a trade if you are not disciplined enough to follow it.
A plan should cater for every eventuality. As Richard Dennis (Turtles fame) said,"Don't worry about where the prices are going. Worry about what you are going to do when they get there."
Think about what is being said here. Once you put your money down on a trade you can not control the prices. So stop worrying about what could happen and concentrate on you trigger points and what you will do when these points are violated. By doing this your trading stops being emotional and now becomes very systematic and stress free.
Without doubt, no trader will last long if he doesn't plan every trade. But there is absolutely no point in making a plan for a trade if you are not disciplined enough to follow it.
A plan should cater for every eventuality. As Richard Dennis (Turtles fame) said,"Don't worry about where the prices are going. Worry about what you are going to do when they get there."
Think about what is being said here. Once you put your money down on a trade you can not control the prices. So stop worrying about what could happen and concentrate on you trigger points and what you will do when these points are violated. By doing this your trading stops being emotional and now becomes very systematic and stress free.
7 Habits Of A Highly Successful Trader (2 of 7)
2) Have a System That fits You:
Every successful trader, investor,money manager,etc.. has a system that fits them. Some are long term, some mechanical, some intuitive, day traders, scalpers, arbitrage, value, momentum.The system its self is not the important factor. What is? Is that the system fits their unique personality.
The system does not matter. I've heard of value investors (Warren Buffet) who make untold millions from the stock market. I've heard of day traders taking home over $2 million per annum in profits. I've heard of a dancer making $2,5 million from Momentum trading. What do they have in common? As you can see it's not the system but they operate a style of trading that they are both happy with and excel at. They wouldn't dream of trading any other way. No-one told them to trade this way it just happened this way.
Too many traders try to copy the latest hot fad in trading. Right now that would be day trading. But that style of trading will not suite every-one. To be a successful day trader you have to love the short term up and downs of the market during the day. Being in contact with quotes for hours at a time. Yes, there are a number of traders making very good incomes from day trading, but there’s many more who lose their shirts within a couple of months and don't even find out whether day trading is suited to their temperament.
August 15, 2010
7 Habits Of A Highly Successful Trader (1 of 7)
1) Take Complete Responsibility:
For the successful trader knows every action he takes, every decision he makes he ,and only he, is responsible for that action.
You will never meet a successful trader who is looking to blame someone else, or something else for the consequences of his results. It just will not happen.
You see, when you accept 100%, no questions asked responsibility for all your actions you close the door to "excuses" behind you. When something goes wrong instead of looking for someone else to shoulder the blame, you will accept responsibility, note it down and vow never to repeat it again. Simply, you are willing to accept you are going to make mistakes, but more importantly, you are going to learn and never repeat those mistakes. A vital component of any winning trader.
Could you imagine Warren Buffet losing a few million $$$'s on a share trade and then blaming the general conditions of the market. Or blaming his broker for giving him dud advice? no way! Just not going to happen. I will guarantee when top traders takes a loss the first thing they will ask them-selves is Did I follow my rules?" If the answer is yes, then they will look at their rules.Is there something that could be changed in their rules to avoid this loss again? Many times the answer will be a re-sounding no.
August 09, 2010
The 2% - 6% Money Management Rules
The greater staying power of traders the greater chance to win. Traders have to stay in markets long enough to win trades. Money management plays an important role in helping traders to survive in markets.
No one win every trades; money management help traders to reduce losses on losing trades. Moreover it also maximizes traders' gains on winning trades.
All traders have ever heard about how important the money management but the most of them are still losing in understanding money management strategies.
To make traders clear and be able to find strategies of managing money that suit to them. Let us talk about a couple of simple and easy money management rules.
The 2% - 6% rules of have been introduced in Dr. Alexander Elder's book "Come Into My Trading Room"
The 2% rule is to protect traders from any single terrible loss that can damage their accounts. With this rule traders risk only 2% of their capital on any single trades. This is for limiting loss to a small fraction of accounts.
Besides a disastrous loss, a series of losses can also damage traders' account. The 6% rule is lent to handle this. Traders have to set the maximum of accumulated loss for a month. When they reach that level of loss, they have to stop opening any new position for rest of the month.
These 2 rules are designed to protect traders from the two types of losses. Nevertheless the 2% - 6% would be change for each trader. For those who are able to accept the higher risk, they might adjust the 2% - 6% rules to 5% - 10%, where the 5% is used to protect the account from any single disastrous loss. While the 10% rules is used to protect traders from any series of losses in each month.
No one win every trades; money management help traders to reduce losses on losing trades. Moreover it also maximizes traders' gains on winning trades.
All traders have ever heard about how important the money management but the most of them are still losing in understanding money management strategies.
To make traders clear and be able to find strategies of managing money that suit to them. Let us talk about a couple of simple and easy money management rules.
The 2% - 6% rules of have been introduced in Dr. Alexander Elder's book "Come Into My Trading Room"
The 2% rule is to protect traders from any single terrible loss that can damage their accounts. With this rule traders risk only 2% of their capital on any single trades. This is for limiting loss to a small fraction of accounts.
Besides a disastrous loss, a series of losses can also damage traders' account. The 6% rule is lent to handle this. Traders have to set the maximum of accumulated loss for a month. When they reach that level of loss, they have to stop opening any new position for rest of the month.
These 2 rules are designed to protect traders from the two types of losses. Nevertheless the 2% - 6% would be change for each trader. For those who are able to accept the higher risk, they might adjust the 2% - 6% rules to 5% - 10%, where the 5% is used to protect the account from any single disastrous loss. While the 10% rules is used to protect traders from any series of losses in each month.
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