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“Chance only favors prepared minds.” – Louis Pasteur
Intriguing questions about trading have been raised by many. Yet, we’d be happy to say that we’ve derived joy from helping others to become better traders. No achievement is better than the awareness of the fact that your professional activities are a huge benefit to some people out there. It’s great to help people achieve financial freedom – the end result of traders’ struggle in the markets – as a result of your effort to help traders achieve their greatest potential. In a phenomenal profession like trading, lifting people out of the quagmire of financial defeat is the greatest goal. We’re lucky to have had trading role models who are willing to reveal time-tested trading facts to us, hence the Part 2 of the series that bears the topic above.
For instance, account balances in trading are a result of managerial skill, not trading accuracy. Negative and positive positions are different from skillfully managed and carelessly managed positions. A positive position might cause some roll-down on your portfolio, whereas a negative position might add some value to your portfolio. As long as a market speculator sticks to a plus expectancy strategy, she/he is skillfully managing a position, irrespective of whether this ends in a plus zone or a minus zone. Why? The reason is that if she/he does this for many samples of positions, she/he would eventually become victorious.
Traits of Successful Market Wizards
5. Victorious market wizards don’t choose money as their number one aim: The reward of being good traders is pecuniary. It isn’t judicious to assume that the ultimate result of the acts of speculation isn’t financial reward. This is the end result of our passion for the markets. However, pecuniary benefit shouldn’t be our number one goal in trading; otherwise we’ll get discouraged when the going becomes tough. In this age when most people crave instant gratification, the promise of financial reward tends to turn us into inordinately and irrationally emotional traders who make poor trading decisions based on subjective reasons, not logical trading process. Those who put money first will inevitably get discouraged and quit when they face challenges. Successful traders have self-improvement and trading mastery as their priority, not pecuniary benefits. They are aware of this fact, and wouldn’t let returns cloud their aims and ambitions as traders. A market wizard can measure his trading efficiency by how they flawlessly execute their trading plans. Really you don’t make mistakes if you trade and lose: you make mistakes only if you don’t follow your trading rules. Your trading efficiency is measured by your ability to avoid mistakes when executing your orders and carrying out trade management. Pecuniary benefit is a mere outcome of flawlessly executing your killer trading plans. Those who think they can predetermine how much percentage returns they can make on weekly, monthly or annual basis are simply having their heads in the clouds. When you target 20% returns on a weekly basis or 50% on a monthly basis, you’re simply going to become an over-trading gambler who does things based on fantasies. You just need to set realistic goals in trading and lower your expectations. You may incur an overall loss in the month you’ve planned to surprise your girlfriend with a winning lotto ticket from the markets, and you may come up with a profit when you least expect it, but you can’t predetermine how much you’re going to make in a given period.
6. Victorious market wizards work on themselves for self improvement: Veteran traders inevitably discover that they need to conquer themselves before they could conquer the markets. The greatest adversary on the way to your trading success is you, because of certain Achilles’ heel you cannot control. There’s a need for you to understand trading psychology and behavioral finance and how they affect your lot in the financial markets. Honest-hearted and serious trading experts have been involved in a series of courses and models that have enhanced their personalities; helping them to discover their true self and potential. This often takes longer than we think. Those who’ve worked seriously on themselves have gone to the next level in trading. They now trade effortlessly and profitably. There are experts in this field, e.g., Dr Van K. Tharp, Dr Woody Johnson, Dr Brett N. Steenbarger, Steve Ward, etc. Without working on oneself psychologically, permanent success is not possible in trading, as it’s a matter of time before one discovers that other trading principles cannot work in the long run without this extremely crucial factor. This fact is ignored at one’s peril.
7. Victorious market wizards carry out extensive research on the markets: Trading veterans have learned myriads of things about the financial markets. They’ve learned what work and what don’t work. They’ve read numerous books, magazines, etc about trading. They’re really trading geeks. Most importantly, out of all the vast information possessed by an individual market wizard, she/he has narrowed everything down to what works for her/him.
8. Victorious market wizards use charts as a primary decision making tool: Price is king and this is no longer a classified fact. If you remove your analytical tools on a chart (cleaning up the chart), you’d see that it’s easier for you to see what’s happening to the price. The simplest and the most effective way to determine whether the market is up or down or sideways is just to look at it. Other analytical tools are only secondary. Making speculative decisions without considering pure price actions is suicidal. It’s far better to base one’s decision on what the price is doing. This might seem commonplace, still it matters a lot when it comes to how market wizards detect great trading opportunities and reap gains eventually. The logic is to watch as price actions develop, returns are realized from taking action while new setups are valid, not when they’re late. Getting ready to take advantage of classical developments on the chart is feasible if you have a wealth of experience. This isn’t to emphasize that market wizards don’t lose or that they can prognosticate future prices with insane accuracy. Conversely, all traders look at the same charts the world over. The only thing trading veterans do is that they can use the current market data to act in advance of what might occur tomorrow. You can endeavor to make it a habit to base your trading decisions on what’s happening on the charts. Back-testing and curve-fitting are great only when testing a strategy, but you make money only when you come to grips with the uncertainty of the future.
Conclusion: Not only do majority of traders fail in the markets, studies reveal that majority of other business ventures flop as well. Most flop because of ineffectual business tactics. Indeed, speculation on the markets can be likened to ventures. Speculators require more than strategies – they require sound trading principles. Besides, those principles would have timeless golden rules, trading psychology, position sizing, risk assessment plan and so on, incorporated into them.
Part 3 of this series is now available.
This article is ended with the quotes below:
“The biggest secrets are always in plain view, and the best view is to look in the mirror…. If you are thinking or behaving in an undisciplined or unorganized way when you are not trading, you will trade in an undisciplined and unorganized manner. Without discipline and rigorous attention to detail, you will not be able to trade successfully. This is also true if your personal life and relationships are not going well, because you will be unable to give complete focus to your trading– and you will fail.” – Dr. Janice Dorn
“Eliminate fear, fear of failure and fear of trading. If you suffer from fear then trading is not for you…. Aim for consistency. One of the keys of successful trading is to repeat good habits time and time again, boring but profitable.” – John Bartlett
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