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| My top five trading tips-By Sandy Jadeja |
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[ 2007-3-5 22:29:00 | By: mojinfu ] |
The popularity of financial spread betting is growing dramatically. Traders who have acquired the necessary skills are making big profits in the markets.
What are the skills required to trade successfully?
The essential basic ingredients required for successful trading have been around for decades. The fact is that as long as human behaviour remains the same, market behaviour will remain the same too.
Keeping this in mind, let's look at five basic but essential components for success in trading:
1. Have a trading plan.
In the best selling book Market Wizards, by Jack D. Schwager, sixteen of the most successful traders in the world describe their trading methodology. Although the systems, methods and markets they trade are different for each of them, they do have one thing in common. They all have a trading plan that they strictly follow.
Studies have shown that over 80% of traders do not have a trading plan. The traders that do have a plan are professional traders and these traders are successful.
2. Exercise good money management.
Money management helps to protect you from large losses and helps preserve capital. There are many theories on this subject alone, but simply put, do not risk large amounts of your capital on any one trade.
3. Cut your losses.
As much as you may have heard this one, this is by far the most broken rule. Classical trading suggests that we cut our losses and let our profits run. Without this concept, the risk of ruin stands a greater chance. As a trader our first aim is to preserve our capital. Without a capital base we have nothing to trade with. Therefore, when we initiate a trade which goes sour, we should "cut" quickly, and on a disciplined basis.
Again a common characteristic of successful traders is their ability to get out of a losing trade without hesitation. In the classic book Reminiscences of a Stock Operator, Jesse Livermore (who is considered to be one of the greatest traders and who made millions in the stock market) lived by this rule.
4. Be patient.
There is a simple preion to guard against overtrading in the markets: Patience. By having the discipline and patience to wait for the right opportunity, you can increase your chances of success greatly by simply waiting for the right trade.
Take your time and choose the best of the crop. Make sure the elements of your chosen strategy are satisfied before putting your trade on.
5. Manage your emotions.
Trading must be treated as a business. In doing so you must not get emotional about your positions. Remember rule no. 1. Plan your trade and trade your plan. This in itself should help keep your emotions in place.
Many traders get emotionally attached to their position, which means they now have an opinion on the market. Opinions are dangerous. Trade what you see and not what you think.
For now, remember that successful trading amounts to doing the right thing all of the time and not just some of the time.
Happy trading!
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