Markets
are ever shifting and dynamic. Price in markets is created by the market’s
participants driven by greed, fear, hopes, opinions and prayers. Prices
on the chart are average of everyone’s opinion or feeling about a specific
stock, currency or commodity. Though no two individuals are alike, human
beings tend to repeat their actions and are a creature of habit. This trend
gets reflected also in market’s movements in the form of repetitive patterns
and shapes within price information represented by charts. Therefore, it makes
good sense to study the price action through usage of charts to decide current
market trends and to predict future market trends. Profitable and reliable
method for analyzing this market is technical study, i.e., analysis of rate charts.
However, it’s important to know that technical study is not perfect.
Ability of any trader to expressively adjust to the changing market
circumstances, alertness of cognitive bias and discipline are the keys to
trading success.
Easiest way to be successful is to watch
people who are thriving and try to grow the attributes that make them succeed. Some
of the major traits of successful investors I have observed in past few years
are:-
Diary of Trading
- Most
successful investors note down the techniques employed to learn the trade, how the
trade was done, what was the desired outcome and what the ultimate outcome was
when trade was closed. The successful trades when visited again offer hints on
things that are done right. I think that most helpful lessons in life come from
failures, equally costly, but most helpful lessons that any trader can obtain
from the markets are by visiting the ineffective trade that made loss.
Revisiting the mistakes as well as pondering over the lessons learnt offers trader
understanding and understanding of the pitfalls; therefore, enabling him to keep
away from repeating same mistakes again.
Money Management and
Risk Tolerance - Trading
isn’t for somebody, who is risk reluctant or who hates to be proven
wrong! Most of the successful traders across the world go off beam in
markets nearly half the time. Successful traders know that key to win in stock trading is to drop less when
wrong as well as make more when correct. Great traders respect risks and
manage it professionally. Only small quantity of capital is on risk on
each trade, generally 0.5 – 1 percent of trading funds. Trade sizes are intentionally
kept manageable, in order that result of one specific trade is not a big deal, let
be it win, draw or lose! Traders, who stay in this game and make big gains in
trading in the long-term, are those who understand significance of wealth in
trading and protect their accounts zealously. Also one among the key elements
noted amongst the successful trader is that they trade with risks capital only,
i.e., money they can easily afford to lose. Scared money will never win, thus
if you’ve to meet every day expenses from trading capitals, I strongly recommend
you to avoid trading as possibilities of success are extremely slim.
Psychologically Strong - Taking
emotional roller coaster rides of every trade or every trading day is the recipe
for physiological exhaustion and burnout. Successful traders find that
daily misses and hits are not vital as the standard over time. The savvy
traders don’t go greedy when going is excellent and don’t get scared when going
gets hard. Remaining objective as well as avoiding emotional response in
trading market is vital to surviving in this game. Here, I will like to add one
of my personal beliefs that meditation helps greatly in trading. Meditation can
help to calm the mind, and calmer mind results in clarity of thoughts and clear
thoughts makes the way to disciplined execution and objective plans.
Discipline and
Business Plan - Trading is one among the toughest
profession; winning investors have business plans for stock trading. They have a set of guidelines and rules to
help stay their ship sailing within the right track. Business plan in stocks trading
would cover the time spend to evaluate markets and trading, strategies and
techniques to focus on, expenses involved, systems to use, maximum
drawdown’s, maximum loss/trade, goals and objectives, etc. The best
traders keep visiting there business plan and change them ever necessary,
improving that with every iteration. Lastly, the most vital trait you will
see in all flourishing traders is discipline. And without discipline no single trader
could be capable, as knowing is not same as doing. Discipline makes traders
competent.
If you’ve such traits, then you’ve
the ingredients to be successful in trading already. If not, then you can
plan to cultivate such traits over time.
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