Putting it all together
When you enter the trading arena you enter an environment unlike anywhere else.The rules you have lived by in the normal outside world no longer apply and will cause you loss.Your very motivation can be your own worst enemy as you seek to extract money from the markets.
To succeed in the markets you need to put in place an entire structure(Personality) in the outside world.The normal behaviour and motivations are not going to help you in the markets. This can be illustrated using the following two examples.
Many people enter the markets because they have had a successful career or business life elsewhere.At this point they may feel a little bored with life and seek a new challenge.This is very normal , and this kind of stimulus all of us have felt at one time or another.But think about this for a minute.Such an individual starting to trade, will probably, like many other traders, trade in a fairly haphazard manner to start with ' emotional trading' because whatever method traders may think they are using, decision is more usually an emotional one.So the overall rationale can be described as ' the person is bored and wants to trade'.So what happens the next time ? Once able to trade , it is very likely that a person will make the emotional decision to do just that when bored.This timing is unlikely to correspond with a low risk trading opportunity.
So the first question traders must ask themselves is 'Why do I trade?' The answer to that simple question may save you a fortune.
Now the second example .In this modern world where we all seek gratification as and when we want it, what do we do when we are offered something nice ? We take it.In the real world what do we do when something unpleasant comes along ? We seek to defer it and hope that time may lessen its impact.What are these tendencies going to do it in the market ? They are going to mean you to take profits too quickly and take lossess too slowly.Yes, you will be cutting your profits and running your lossess. What works in the real world does not work in the market.
You need a structure and each level builds on the next and indeed is essential if the next level is going to be put in place.Each trader already has such a structure in place but if trading and loosing then the structure needs to be rebuilt along the right lines.
The first level is 'YOU'.Obviously if you are not in place , do not exist, then it will not be possible to add further levels.But you have to also determine the overall structure, as you have to build something which suits your personality.As such , each individual trader will have a somewhat different structure, although there will always be common features.You have to be disinterested in what others say about the market.Because your trading structure is going to be different from others.You must learn to initiate and manage your own trades, nothing else is going to work.
There are many fundamental misconceptions about markets and trading.Your natural tallent for analysis is going to be different from your natural tallent for trading.Your analysis will help you a lot to understand the market and develop your tallent for trading. The essentials of markets are detailed below-:
1)You may think that the market exists somewhere out there. WRONG. How you think of the market is unique and exists only in your head.To win you have to ensure that your version of the market is 'useful' and then make use of it.
2)You may think you see your version of the market clearly. WRONG . What you see is shrouded with in an emotional whirlwind.The whirlwind will get a lot faster when you have a trading position in place.
3)You may think that trading is an easy function involving buying low and selling high. WRONG. In fact trading is not difficult , although nor is it easy, but the emotional problems, you bring with you to the market mean that only a few win.
These three statements summarise what you are getting into. In normal walks of life these sort of things either do not happen or you soon learn to stay away.The market is different.It does not do the same things all the time.So one day a particular tactic will work, the next day it won't.What you can do is to develop a mental discipline.You are the essential element behind the way you trade.You form the base of the structure.This is because you have to develop a style of trading which suits you and in no other way is it going to work.
If you pursue any book shop or on line trading material , you will get tonnes of material , good and bad, how will grade the material and find out which one is suitable for you.You will also find that many people who have provided these materials are not traders or even some may have failed in trading and turned to teaching traders for their living.Apart from the analysis technique , you also have to learn trading skills, which ultimately are about 90% of this game.Do not expect to be an instant success at trading, you have to learn this business as you do any other.To introduce the trading experience you must look inside yourself.This is where it all takes place.There are three important points to stress upon.
1)In the trading environment there is no absolute truth.We never know what is the right thing to do in any one situation and what is right for one trader is wrong for another.We therfore have to formulate 'useful beliefs' which work for us.
2)Given this fact no rules of trading is cast in stone, it is important you discover your own 'useful beliefs' that will form the basis of your trading philosophy.
3) In similar vein it is your personality which should guide you in your search for the right approach.Ask the question " What is right for me ?' and then go out and find it.So What are the simple rules that should form a part of your trading.
(1) Always limit your lossess.
(2) Try to ensure that your average gain is at least 2.5 times your average loss.
(3) Endeavor to find an approach which gives you an edge.
(4) Make sure you are comfortable with your trading approach.This involves self discovery, something many shy away from.
(5) Learn to let profits run.
(6) Learn to trade selectively.
(7)Learn to control your own self sabotaging emotions.