1. Decide that you want to trade for the long haul. i.e decide that you want to trade 20 years from now.
2. Learn as much as you can. Read, and listen to the experts, but keep a healthy disbelief about everything.
3. Do not be greedy and rush to trade – take your time to learn. The market will be there with many good opportunities in the months and years ahead.
4. Develop a method for analyzing the market, that is, if A happens, B is likely to happen. Markets have many dimensions – use several analytics methods to confirm trades.
5. Develop a money management plan. Your first goal should be of long term survival, second goal, a steady growth of capital and third goal, making high profits.
6. Be aware the trader is the weakest link in the system. Learn how to avoid losses and develop your method of cutting out impulsive trades.
7. Winners think, feel and act differently than loosers. You must look within yourself and strip away the illusions and change your old way of thinking, acting and being. Change is hard, but if you want to be a successful trader, you have to work on changing your personality.
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rssWords of Wisdom
These generally brief phrases often include such pearls of wisdom as:
“Buy low, sell high.”
This maxim describes profitable trading in a nutshell and represents what every successful trader aspires to do. Of course, this is much easier said than done.
“Let your profits run, but cut your losses short. “
Allowing a winning position to continue making profits while taking losses quickly can make up a solid trading strategy in itself, and it is a key element of just about any good money management plan.
Many successful traders apply this as a trading rule in their trading plans in one form or another, perhaps by having a minimum risk reward ratio where the anticipated reward on a trade is always greater than the risk taken.
“Sit on your hands when you don’t have a clue.”
Knowing when you do not know where the market is going and discerning when to stay out of the market because of difficult trading conditions or because of your individual portfolio situation can save a trader considerable money and frustration.
Remember, good trading opportunities eventually arise for those who wait for them patiently.
“No one ever went broke taking a profit.”
This seems a wise and yet somewhat limiting expression perhaps. Famous trader Jesse Livermore used to say this and then finish with “but no one ever got rich taking three or four points out of bull market”. Taking profits will always add to your account, but by “letting profits run”, a substantially higher profit can often be had.
“It’s never too low to sell or too high to buy.”
Typically, markets will continue moving in the direction of the general trend. When a high or low is made, often a sufficient amount of momentum will propel the price to an ever higher high or lower low.
“Price discounts all.”
The mantra of technical analysts, the saying refers to the belief that news about any event related to the trading instrument – whether it is related to current events or supply and demand – will already be included in the price of a currency.
“All news is old news.”
A variation on “Price discounts all”, this saying refers to the idea that the market has already moved to factor information into the currency pair’s exchange rate regardless of what the news that came out was.
“Buy the rumor, sell the fact.”
Buying the rumor means going long before a bullish news item ever makes it to the news wires for fundamental analysts to mull over. Trading activity then ensues based on this rumor indicating that an item of importance will soon be released. The trader wise to the rumor can take advantage of the release of this news by selling out their position once it becomes public.
“Plan your trade and trade your plan.”
Trading does not favor the scatterbrained over the long term, so having a comprehensive and objective trading plan which can be easily followed and implemented makes up a key component of any successful trader’s methods.
“The trend is your friend.”
Keeping abreast of the major trend in the market and following it by positioning according to its overall direction will tend to give a trader an edge.
“Markets go up the stairs and down the elevator.”
This saying refers to the slow and plodding nature with which markets often go up, whereas when prices decline, they tend to do it in a much faster and abrupt way. While less of a factor in the forex market, this is especially true of stock markets.
Basically, all of the above sayings contain valuable advice and trading wisdom that can be useful for just about anyone involved or thinking about getting involved in trading forex or any other market.
Forecasting the Market
Amateurs attempt to make a forecast while professionals manage information to make decisions based on probabilities. Dr. Alexander Elder compares this to a Doctor that received a patient with a knife stabbed in his chest. The family will ask, “will he survive?” and “when can he go home?” But the Doctor is not forecasting, he must prevent the patient from dying, remove the knife, saturate the organs and carefully watch for an infection. He monitors the health trend of the patient and takes measures to prevent any complications. He is managing, not forecasting. To profit in trading you do not need to forecast the future, you need to derive from the market whether the bulls or bears are in control. You need to practice money management techniques for long term survival. You trade against the sharpest mind in the ocean-like markets. Mental discipline is an undivided part of trading. Please remember the following points: Understand you are in the market for the long term, that you want to be a trader in even 20 years from now Develop your trading strategy, either technical or fundamental analysis. If “x” happens then “y “is therefore likely to take place. You may need different tools for trading a bull or a bear market Develop a money management plan, with the first goal being long term survival. Secondary goal is steady money growth and third goal would be high profits. Successful traders do not concentrate on the profit itself but maintaining successful trades regardless of the earned amount. Winners feel, think and act different than losers. Look inside yourself, eliminate the illusions and change the way you have been thinking and acting. Changing is hard but could pave the way to becoming a successful trader. |