Anyone can become a trader but becoming one of the great traders demands more than investment cash and a three-piece suit. There are always people wanting to join the ranks of master traders and make money like that. Only a small number of them succeed or even come close. Traders who are consistent and successful are about as uncommon as multi-million dollar winning lottery tickets.
The critical distinction between successful traders and freshers are the essential abilities that master traders have. Once you’ve mastered these skills, you’ll be well on your way to becoming a trading genius.
#1: Develop a winning approach
You can only succeed by developing a winning approach. You can’t just hope that you’ll come across the right trade at the right time, and if you do, that one big win will solve all your problems and put your account back in positive territory.
#2: Discipline and trade management
You need to have good entry discipline and be able to manage risk once you enter a trade. You may identify several trades every day, but it’s doubtful that they will all work out to an acceptable profit. Even when you’re trading well, trades always fail because of normal fluctuations in price action (or even perfectly predictable ones such as news releases). If this happens, don’t be tempted to keep trading and adding to a losing position because this could easily lead to a blow-up.
#3: Accept losses as part of the game
You’re going to have losses at some point; you need to accept this and not take it personally. Every trader goes through tough times; no one is consistently profitable over time (without taking too much risk). Trading success requires that you follow your own rules and trade within your comfort zone; this discipline will set you apart from the crowd and enable you to survive for the long term.
#4: Take your profits
Every day we could identify several trades we want to take but only enter 1 or 2, and this rule applies after taking our first trade. It is often the best way to manage your risk because if you’ve chosen a quality setup and this fails, it will be scarce that the market will come back to offer you another high-probability trade. Don’t let greed or fear make this decision for you. Whether you’re trading forex, indices, commodities or stocks, the rule applies—identify your setup with good money management rules in place and then concentrate on managing that risk once you take the first trade.
#5: Never trade hungry
You have no business making any decisions when you’re hungry, tired or emotional. It can result in wrong decision-making, so ensure that you plan your trading around a routine whenever possible. It will help you to avoid making any rash decisions based on emotions during this time.
#6: Respect the markets
Markets are highly efficient at absorbing information; this means that prices change quickly in response to new information, and this can leave many traders caught on the wrong side of a trend – this is the nature of trading. Not only does this mean that market timing is useless, but it also highlights why stops are more important than trying to predict future price direction, which no one has any idea about anyway!
If you want to be successful as a trader, develop your rules, stick to them with discipline and make sure you have some money management plan before taking any trades. You should ensure that this is an effective plan for your risk profile and that it doesn’t lead to you taking more than 1% of your bankroll per trade.
If this is done correctly over time, it will ensure that you’ll be around long enough to take them when the big winning trades come along! Good luck in whatever trading challenges lie ahead.
Knowledge is power; If this article was helpful, informative or enjoyable, please click this link and find out how the pros do it.