Become a Successful Trader – Introduction
I won’t lie. Trading is a tough job where only a select few people survive. In my many years’ of experience, I have interacted with hundreds of people whose only desire in life is to become traders. I have also had an opportunity to train tens of people. They begin with unimaginable zeal and enthusiasm only to give up along the way. One of the mistakes these people make is to assume that trading is an easy job. They assume it’s like gambling where your odds of making it is half. I have seen new traders make mediocre trading decisions only to give up along the way. In this article, I will highlight a number of tips to become part of the 10% that have mastered the art and science of trading. I write this not as a member of the 10% but as a learner who is always looking for strategies and opportunities to enter this winning team of champions.
Become a Successful Trader – Read
The first thing that you should do as you begin your trading career is to read. Luckily for you, there are hundreds of books that are available for you to read. Some of these books are available online for free while others you will be required to buy. Also, there are books for traders of all levels to read. The benefit of reading is that it opens you to the world of ideas. It helps you discover things that other traders do and what others have done in the past. As a start, I recommend the following books. One, I recommend a book called Millionaire traders by Kathy Lien. This book features more than 10 interviews with traders. Another book is Octopus which is a true story of a wrecked trader. Other books you should read are: Exorbitant exuberance, and Currency wars.
Become a Successful Trader – Practice
Practice makes perfect. If you want to succeed as a trader, you must be ready to spend significant amount of time practicing. If you are new to trading, you should practice on a demo account to identify the appropriate trading plan for you. If on the other hand you are an experienced professional, you should also practice on new strategies. This will help you come up with new and better trading strategies that will make you a better trader.
Become a Successful Trader – Trading plan
The next thing you need to have as a trader is a trading plan. A trading plan can either be manual or automated. I prefer using a manual trading plan that incorporates a number of technical and fundamental indicators. With the plan, I am able to know the times I should be involved with trading and the times I should keep off. In addition, I am able to determine the right lot size for certain types of markets. You should create and back-test your trading plan.
Become a Successful Trader – Mentor
In any field that you venture into, the role of a mentor should never be under-estimated. When you have a mentor, you have someone to look up to. You have someone who has been there, done that to guide you. When I was starting out, the biggest challenge I had was to find a mentor. So, I approached one of the biggest investors in the world. He runs a multibillion dollar hedge fund. I didn’t expect that he would actually reply to my message. Fortunately, he did so after a very short period of time. He has been an invaluable mentor for me over the years.
Become a Successful Trader – Learn from Mistakes
As a trader, you will not have a 100% success rate. Some of the trades you open will fail. In fact, the billionaire hedge fund manager mentioned above recently lost more than $3 billion from a trade gone wrong. The common tendency for traders who lose money is to give up. However, if you want to succeed, you should develop a new attitude towards losses. Losses are what makes trading fun. Particularly, you learn more from losses rather than from successes. Therefore, embrace failure as an important path towards success.
Become a Successful Trader – Risk Management
Trading is always risky. Every trade you open has a chance to go either on your side or against you. Remember that all traders lose money. However, successful traders allocate their funds in such a way that they won’t be affected by the maximum loss they make. This is because they risk only a small part of their investment. By having adaptive risk management strategies, you will realize a number of benefits. One, you will be at a position to trade for a long period of time. Secondly, you will be in position to make modest gains of your investment without much stress. Third, you will be at a good position to protect your capital.
Become a Successful Trader – Independent decisions
In trading, there are so many noisemakers that might hinder or aid your decision making process. These noisemakers include commentaries from financial and economic ‘experts’ who appear in major business news channels on a daily basis. If you want to fail, you should listen and act according to these guys’ proposals. If you want to succeed, listen to them and make your own independent decisions.
Become a Successful Trader – Useful Links
- Find other Tips to improve your trader skills on Stock Trader
- Find other Tips to improve your trader skills on Trading Academy
- Find other Tips to improve your trader skills on Investopedia