Every person can try himself in trading, but good and successful trading professionals – are very few among them. In order to become one of the best, there are some rules that you should always remember:
Always cut your losses
All great traders tend to share the same thought about losses – they should be limited. Always. And this is completely understandable, since the safety of your capital determines a traders ability to “remain in the game”. You should also understand the simple math: a cumulative loss of 25% should be covered by winnings of 33%; 33% losses require 50% winnings to cover up. And if we go as far as recalling 2008, we can see that losses of 50% need 100% growth to be compensated. This is why it is of paramount importance to keep your deposit intact.
Warren Buffet once said a very wise phrase: “The first rule of investing is not to lose money. Second? Never forget rule number one”.
Constant confidence in your actions
Seeing a good opportunity, but never using it – is not an elite traders way of thinking. Those guys are always confident in the plan of action that they’ve chose to follow. They tend to know what to do when everything is going according to plan, and even more so in the case where everything happens vice versa )which is much more important!). It’s impossible to learn being confident. Confidence automatically comes along with the process of decision making and gaining trading experience.
You should always separate successful trading and your ego. Great traders are often great individuals, but they do not argue the market, when it points at their mistakes. Such traders accept this experience, and move on.
A man should always remember that it is futile to argue the market, and your woman. Both are usually wiser than you, and always right.
Michael Jordan became the best basketball player not because he once scored 30 points in a match. He became the best, because his average scores in EVERY match throughout his career were 30 points.
This is why paying too much attention to daily and intraday results is not very useful – it is much more important to achieve profitable months, quarters, and years with a minimal drawdown. Success in a growing market, and then losing everything at the first retracement is not the way to go.
Always the Student
A successful trader is always in a learning curve. He is always trying to improve his skills. One of the ways to do this – is constantly analyzing your trades.
For technical analysis – it is studying entry and exit points, understanding why everything went the way it did, and why a trade was lost. Knowing these things will help you learn successful trading.