Quote from duhmentor:
What it takes to be a successful trader,
.
First and Foremost you have to be willing to work.
I know this is not what you want to hear but you have to do something besides click a mouse and have your fortune come to you. You have to take the time and make the effort.
Trading should be treated as a business. If you treat it like a Casino then why are you expecting to win?
If I were a friend and came to you asking you to invest in my business what would you want to know before you let me have any money?
Are you going to just ask how much can I make? Or will you also ask the following?
When can I get my money back? What are my chances of losing all my money? How does the business work? How will you make money? Are there any guarantees? What do you know about this business? Have you proven that you can make money? What can possibly go wrong?
How many people open a trading account without asking themselves these questions? Would it help if I had a business plan answering all these questions?
You have to have a Plan.
A Plan wonât guarantee success.
It will tell you how you plan to make money, what procedures you will follow.
It spells out when to get in and when to get out.
It explains how you will control risk
It is a list of things you will do in response to events you cannot control.
It allow you to control the only thing you have control over which is yourself
You have to learn about the market.
What do you know about the market you are going to trade? Who makes money and at whose expense? Who controls it? Who is the so-called smart money? How do they make their money? How do you plan to take money out of this market? Whose money are you going to take? This should be in your Plan.
You have to learn how to trade.
How are you going to learn to trade? I would suggest by trading. How did you learn all the skills you possess today such as riding a bike, driving a car, or playing golf? You learn best by doing, and the more you do the better you get.
In todayâs trading environment you have demo accounts. A good place to learn. I hear the screaming that trading demo and real money are eons apart. Use the demo to see if you can follow your rules. Itâs also a good way to test strategies before you commit real money to them. Trade the same capital that you plan to start with. Donât trade a million dollar demo account if youâre planning on starting with $10,000. Keep track of what works and what doesnât. Itâs a good way to build confidence. Demo trade until you are convinced your strategies have an edge. This should be in your Plan.
You have to learn to keep records:
How will you keep track of your trades? How will you measure you success rate? How do you determine if you had a good or bad trade? A good trade can lose money. Which strategy works best? How often will you review your trades and what are you looking for? This should be in your Plan.
You have to learn about money management.
How much money will you start with? How much are you willing to put at risk on one trade? How much do you hope to make on one trade? How much do you have to lose before you quit for the day, the week, the month, or permanently? How and when will you add money to or take money out of the account. Is there a maximum amount I will allocate to any one position? This should be in your Pl.an
You have to account for the unexpected.
How will you handle a market meltdown, a terrorist attack, or any other unforeseen event that might affect the market? What if your power goes off, your computer freezes up, or your broker goes off line? Do you have back-ups? Are important phone #s on you speed dial? Will your speed dial work if the power is off? This should be in your Plan.
You have to learn about yourself.
Are you driven by Fear or Greed? What emotions will influence your trading? Can you accept a small loss or is the fear of missing a move so great that youâll let it go and see what happens. Will you sell at the target or will you see if it will go a little higher. Is it easy to justify taking a quick small profit rather than letting the trade move to the planned target or get stopped out. Do you take it personally when you are wrong? You have to know these things before you ever enter a trade. You also have to know how you are going to deal with them. This should be in your Plan.
The plan should have specific goals with detailed actions required to accomplish these goals by a specific date. If you are not there by that time you have to determine why and adjust the plan.
The Plan doesnât guarantee success. The odds of succeeding are way better with one than without one. A specific and detailed trading plan:
Reduces your chances of making bad trades.
Guides the decision making process when money is on the line
Takes emotion out of the equation.
Allows you to evaluate your trades
Encourages discipline
Reduces stress.
When your trading is not going well youâll be able to blame two things.
The plan is not working or you are not following the plan. You can fix both.
I donât understand the resistance to having a trading plan. I can only think of two reasons:
1) Itâs a lot of work. I mentioned work at the beginning. I donât think youâll find success without doing a little.
or
2) By having a plan the responsibility switches to you. You are now accountable for your actions. You canât blame the market or any of its participants for your decisions.
It does take a lot of time and it does make you accountable and it just might move you into that elusive and exclusive 5 to 10 percent of traders that call themselves successful.
