How To Become A Successful Trader
Many people who set out to have a successful trading career end up losing money. This is despite the existence of many reputable share trading education companies, an abundance of trading books available offering investment tips and the presence of solid trading rules that have stood the test of time. These rules are not secret to anyone either - almost any book will refer to some of them. Yet despite all this, many people still find it difficult to achieve long term trading profits.
So what is it that separates successful profitable trading from those who fail? If you ask anybody who has studied trading for any period of time, they will answer ‘psychology’. Essentially, your mental ability to manage losses and profits and the good and the bad times in trading, manage risk, to not become too greedy and many others are all encapsulated under the heading of ‘trading psychology’. There have been numerous professional articles and books written on the subject of ‘the psychology of trading’ and therefore this article is not intended to elaborate any further on an already well debated and discussed topic, except for one area.
The most important stock investing tip I have ever grasped is what I am about to explain… One thing that many people struggle to come to terms with is their expectations of their trading. Too many people have unrealistic expectations and expect to make triple digit unrealistic trade profits consistently, for example.
So how did our unrealistic expectations come to exist? I blame the instant-fix mentality that pervades our daily lives, catering to our appetite for gratification now. I suppose it’s not really our fault, as instant gratification is wired into our primitive brains; the idea that things can and should be powerful and easy has been a long-standing technological trend.
When one ventures out into gatherings of traders, it is amusing to listen to those who claim anything less than doubling or tripling their cash is not worth their time or effort. These foolhardy individuals will not even listen to the rock solid plan that can guarantee a 25 - 35% annual return on investment.
Unfortunately for these people, their expectations are often too high and unrealistic. There will be times when they will suffer several losing trades in a row and when this occurs, they potentially will not be able to get back on track. With a slight drawdown in their trading capital and with their unrealistic goals in their mind, they will start to bend the rules and assume unacceptable levels of risk in order to regain the losses quickly and achieve their lofty goals.
An additional dilemma that some traders face is that even when their goals are a more realistic 20% annually, for instance, they think they will attain that return in only the first few weeks instead of taking a longer term look over the 12 months. Twenty percent annually is merely a bit more than 1.5% monthly but some traders might anticipate attaining that rapidly and might espouse some of the bad habits like the ones described previously.
Ray has found that a winning approach is only one component of trading success. In addition, traders need skills in market profiling and money management. They need to master the psychology of trading success by understanding what motivates them and coming to terms with what scares them.