Trading Like a Pro

One of your dreams has always been to trade the markets and make a comfortable living, not having to rely on anyone else but your own skills. Many persons achieve this goal, yet many more fall by the wayside. What then, makes the difference? Here are a few ideas that may help you.

Believe in Yourself.
Believe that you will be successful. All great traders have an innate self confidence. Their brains are wired for success. Examine your own life so far. How successful have you been? Don’t think for one minute that simply because you are mediocre at your present job that you are going to join the Wall Street crowd and be an instant star. It simply doesn’t work like that. Successful traders work hard each day. To them, trading is a business. They plan their trading carefully and set goals both short and long term.

Develop a Trading Strategy.
Here again, you simply don’t just don’t trade on instinct, or what you hear on TV. You may be right once and a while but overall you are destined for failure. Sit down and write out your trading plan. That means exactly when you are going to enter and exit your trade. Then back test your strategy. Does it work over the long term? What is the percentage of winning and losing trades? How much money does it produce for your winning trades and how much for your losing trades?
Try to develop your own plan. Using someone else’s techniques may work for them but not for you. Your brain is wired in a special way and may not necessarily work the same way as someone else‘s. Don’t let the two monsters of fear and greed be your guide. Develop patience. Be confident but not overconfident.

Risk Only What You Can Afford.
One sure way of losing it all is to use money for daily expenses or your kid’s college expenses. Traders who do this end up putting excess stress and pressure on themselves and invariably make bad decisions that cost them their entire capital.

Use Technology.
Use technology to back test your plan BEFORE you start trading. Trading is electronic and gives you instant results. This can be a great advantage or entice you to make mistakes that cost you money.

Protect Capital.
It’s not the number of winning trades that counts. It is that you must make more money on your winning trades than your losing trades. The only way to do this is to use stop loss orders. This may be your most difficult task because you inherently do not want to admit that you may lose money. Just do it. Risk only 2% of your capital on any given trade. Just remember that a series of losing trades can quickly deplete your capital if you risk too much on your trades.

Be Realistic.
Let’s say you want to make 30% on your trades. Using small amounts of capital such as $5,000 will not produce enough return to live comfortably.

Learn to Accept Losses.
No one wants to lose money. Unlike other jobs where you get your weekly paycheck, trading has no guarantees. You will have good and bad days. Don’t let your emotions rule your trading, going from euphoria to depression, back and forth like a bouncing ball. Take each day in stride. LET GO of your trades each day. Tomorrow is a new day with a new set of challenges. Great traders win on average only 40% of the time. Their success is that they make more on their winning trades than losing ones.

Take a Break.
If you have a losing streak, take time off to analyze your plan. If it is not working, stop using it. It may mean starting over but it is better to start over than lose all your money.

4 Responses to Trading Like a Pro

  1. May says:

    Great article. Another idea is to check with your broker if you can have access to any of the research reports that are prepared by analysts to gather more information on the companies you are following and to see what the consensus is on the street. Analysts are not always right but they can provide some great research.

  2. […] @ Investing Money writes Trading Like a Pro – Many persons go trading the markets and make a comfortable living. yet many more fall. What […]

  3. […] @ Investing Money writes Trading Like a Pro – Many persons go trading the markets and make a comfortable living. yet many more fall. What […]

  4. […] @ Investing Money writes Trading Like a Pro – Many persons go trading the markets and make a comfortable living. yet many more fall. What […]