Eliminating Trading Mistakes
Unfortunately, most traders lose money. The ones that don’t somehow manage to either break even or even turn a profit. That they accomplish this consistently poses the important question: How do they do that?
There is no magic potion. However, there are recurring fundamental flaws that stop most traders from being successful.
To be a consistently successful trader you must have a defined trading strategy. It must be a simple, clear and concise way of analyzing markets. Over the long run going by gut instinct or following tips may occasionally prove profitable . However, if you don’t have a defined trading system, then you don’t have a way to know what constitutes a buy or sell signal or how to correctly identify the trend.
Write down your system. Define it by writing what your analytical tools are and how you use them. Write down what constitutes a buy, a sell, your stop losses, and instructions on flattening a position. And keep your strategy simple! No more than a few sentences because it is likely that anything more will be too complicated.
Next you must have the discipline to follow your system. Any lack of discipline will prove fatal and emotionally disturbing. The formula for success demands consistency.
Be realistic! Do not believe the hype ads that promise to turn your $5000.00 into $50,00.00 if you buy their books, newsletter, CD’s or by taking their courses. You set your own expectations by reviewing your trades and following your personal trading strategies.
It is possible to experience above-average returns trading your own account. The difficulty is to do it without taking on above-average risk. Every new trader sets goals for their first year of trading and expect to get returns of anywhere from 50% to 200%. It is my believe that the goal for the first year for new traders should be zero to 25%. This is realistic and these figures will clearly demonstrate the benefits of minimizing losses and following your trading strategies consistently. The better able you are to follow your strategic guidelines, the greater your confidence to be able to recreate winning trades.
