In order to avoid being a trader with bad habits which will turn your capital into emptiness, try to avoid certain mistakes that everybody agrees should be avoided. In this article I will try to show some trading habits.
1.0 Effective traders do not trade too much
Overtrading is just like overdoing anything – exaggerating and that is never good in anything. In trading, it means wasting money and trying to hit a moving target. That is not necessary. Trading with patience is what will make your ways those of a winner. Right way is finding a target, and then shooting, with taking a breath. Metaphorically, of course, but the point is obvious. Also, the edge is what gets a sage win, so wasting money around won’t get you to an edge.
Keeping too calm with losses while imagining your account is being taken care of with a couple of small wins is unmistakable way to complete failure. Therefore, take only big wins, and allow small losses.
2.0 Successful Forex Traders are emotionally and mentally stable – “nimble traders”
Believing that “your” way is the only right way has never gotten anything to anybody, so it will never get anything to you. Stubborn ideologists are not successful businessmen. Smart and (statistics show) successful trader is willing to take advice and “switch sides”, change markets in order to win. Another thing for becoming a successful trader means that you will have to acknowledge when you are wrong and you should be aware that people won’t think that you are week if you admit your mistakes, so don’t be afraid to realize when you are wrong in order to get things right as soon as possible.
I learned one interesting term in dailyfx webinars from dailyfx analyst Michael Boutros (@MBForex) and it was term: “nimble trader”. Nimble trader can be bullish in Monday but if weekly low is broken and price starts to go down – he will start to sell. Support and resistance must be respected.
Trusting to yourself too much, even though your deeds and success shows that you are wrong. Piling up losses while still believing that your trade is going to turn around does one thing; piles up losses. Use stop losses save a trade and save nerves for another opportunity. Like in basketball, if your team is trailing 20 points in the last five minutes, take out your star player and rest him for another game, as well as spare him a risk of possible injury in a game that you won’t win anyway.
I suggest you to see this nice video made by Fxpro.co.uk about trading and emotions:
3.0 Excellent traders believe their analysis
I am not sure what information you can get on certain TV stations that have brief news called “business news” for being a successful trader. Other than sharing brief facts about things that happen, you don’t get true advice or advice at all. So don’t think that by watching CNBC or Bloomberg can get you any relevant trading ideas.
It has been obvious for a while that traders who are trying to get stock picks are among the unsuccessful ones, while profitable traders are doing a real job by developing plans and methods for their best trading.
4.0 Effective Traders have strategy and unique trading style
To start harshly, I will tell you that you won’t find the best trading method elsewhere. You cannot copy a winning method for your trading. If you analyze other’s trading methods, you will find for yourself that all have good and bad aspects. You will find mistakes and good things in every method someone tells you about. Even if somebody has got a really good score with his trading method, you might find certain mistakes. And there is a justified reason for that. Many successful traders actually play different tactics when trading. The best way – should there ever be one – is to try it all out, everything you heard had worked for someone, but it doesn’t have to work for you. Therefore, try out and see how it is going.
So let’s see how different methods can turnout.
Day trading makes it easier considering that there is no overnight risk. But it takes a lot of time to follow all the action ongoing throughout the day and trade patiently and with full attention.
Following trends will make it easier if you don’t want to do many entries and exits, as you will always be after a good trend. But the bad side of this story is that money you make is not going to be big – mostly.
Swing trading will allow you to profit without buying at high probability supports and shorting into resistance levels. But in order to cut losses, you will have to stop losses quickly.
Trading as a growth investor you can really make big money if you manage to buy stocks in a good company that has stable value and when the time is right, you can exit with a huge profit. But if it goes downtrend, the risk of losing big is high.
Trading with options enables you to control your losses, as you know exactly how much you invest. This good side of the story is sort of “defense” talk. But also, when “attacking”, option trading offers big opportunities if you are sure about the liquidity of your options.
All these aspects of trading are suitable for somebody. Depending on what you prefer to achieve regarding the peace of mind and the pace of your business, you should decide on some of methods for trading.
5.0 Patience, patience, patience
Generally, most mistakes are connected to arrogance and impatience. If you look around, you will see that those who afford quality living from working this job got where they are now by taking slow steps and by waiting patiently, and growing the stairs of success slowly. Also, you will see that those who were rushing are still rushing to overcome the obstacles from the beginning. In the era of internet when information is being spread quickly, people think that they don’t need to adopt certain information and knowledge, as they believe the knowledge is in the internet, written down somewhere just waiting them to read it. Because of that, real study and technical analysis become ignored and thrown away for somebody else to do it and to pass the recipe on. It simply doesn’t happen, because in this kitchen every trader must find their own ingredients to a successful and tasty dish, and not because of manners, but because market works that way – you must know how much time, money, nerves and effort you can invest.