Saturday, March 17, 2012

What it takes to become a successful Trader

 

After getting to know what is trading and what all are involved in it, I guess I have developed a little insight into knowing what it takes to be a successful trader. There are some things that should not be ignored by traders even who are on the top of the ladder.

1. Trading is not a “Get Rick Quick Scheme”

Well.. Many of us have so many perceptions about traders. They make a lot of money, they get rich overnight when going with the flow of the market, it is easy to make money out of the market etc. But, let me tell you.. from a study long long ago, it says that only 20% of the traders emerge as winners and other 80% lose their money. So, it proves logical.. these 20% people make profits out of the losses of other 80% people. So, why do most of the traders lose and only a handful win ? explained below.

2. Discipline is most important characteristic of a successful trader.

Discipline .. one such characteristic that is not present in us. well.. to say, in most of us. Do not trade the money you cant afford to lose. Set a limit on daily losses you can bear and also a limit on daily profits you want to acquire. Sounds weird .. ? but it is nt. Setting a limit on profits will not make you greedy. It will also save you from drastic changes in the market. Once you reach your profit level and sell your stock, then there is no need to regret if the price goes a little above and falls down rapidly before you can notice.

3. Protecting your Capital is the greatest profit

Yes. The first objective of any freshman trader is to protect his capital. Generation of profits is a later part of the game but preserving the existing capital is more important. You need to have some money with you if you are hoping for profits tomorrow. Do not lose your capital expecting huge gains in a particular day.

4. Quit when its right to quit.

I have observed on so many forums, where people stick on to a particular trade even if its declining with just hopes of it getting back into the game. Please open your eyes. Minimize your losses when you know that you are losing. Its not wise to bet on a limping horse.

5. Let the system play, not your emotions

This is more important point one should always remember. Do not play the market by your instincts or emotions. Develop a system for yourself.. make a strategy, stick to it no matter what happens. You can feel the wonder of the system over a long run when your profit days are much more than losing days. So, Its always important to develop a strategy, stick to it, make money. Do not let your emotions such as fear, greed takeover your decisions. If you really think that you are moving away from your system, then stay out of the market for some period.. may be a week or two. Then, get back into the game.

This is for now.. basics of trading. Keep hooked for more. The next posts will focus on technical aspects, improving a strategy and how to start and stop trading. Add your comments if you have any.

 

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4 comments:

  1. This is a nice way of starting and I look forward for more on this thank u

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    Replies
    1. Thank you.. will keep posting along with my understanding.

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  2. Work as an apprentice under a Gujju :P

    ReplyDelete