Financial Markets are under rout all round the globe. Whether you are day trader, positional trader or swing trader ,there are fundamental skills that each trader should master. Skill-building activities will help you sharpen your ability to make money and cash in on critical market movements like what we are seeing now.
- Never ever go for perfect trade but focus on consistency
Consistent profits are achieved from winning more than you lose – not winning every single trade.There are plenty of professional traders who generate profits by winning just 10% of their trades by maximizing gains and minimizing their losses.
- Stick to a Trading Plan/ Trading Strategy
Developing a trading plan is extremely important.Day trading around your own set plan for each position will produce consistent profits. A trading plan planner should be your best friend when developing your own trading style.The key is sticking to what you’ve written down on paper. As we have discussed before we work on Price Action trading strategy, so we do not trade on news we just trade as System is signalling us. We have firm belief price is everything so we just trade the system signals.
- Know the Odds
You should know the payoff odds for each trade that you take.Scalping produces large gains from small movements with higher risk than swing trading. Your trading plan should include a way to regulate how much capital you’re willing to risk on each position – but you should never risk more than 2% of your total account value.
- Complete Trading Plan
The skill to plan is the most important. A complete trading plan should be more than just “trade everyday from 9-3.” A plan should include how to act in upswings and downswings and how to protect your capital.
In many cases, a thin plan is worse than no plan at all.Stick to your guidelines to get the most out of each trade.
- Ability to Keep Emotions Under Control
It’s hard not to be emotional with your money is at stake on the line each moment of the day.Think like you would in a survival scenario;you’ve got to be calm and keep your head above the water.Many traders slip from their plan and take positions to cover losses only to lose more money. Over time,a complete trading plan will produce consistent profits,but only if you believe in it.
- Know How the Market Responds
After getting some experience, you should be able to know how the market responds to certain events before they happen. Like today we know market will bleed so no point in going long in market no matter what happens. Either be with the trend or stay on sideline.
Are you a Loss making trader ?
Trading is a profession where even if you are having 10 years of experience but still you might be losing money. So what are the qualities of loss making traders, If you are having any of them, Beware !! Get your act together and get rid of these bad habits.
- Loss Making Trader do not understand what all the fuss is about risk management and trader psychology they do not need all that they are special.
- Loss Making Trader believe there is some magic trading method that always wins, they search for the Holy Grail of trading.
- Loss Making Trader do not understand that the very best traders have strings of losses , losing months, and sometimes even losing years. They think rich traders always win.
- Loss Making Trader want to know what is going up or down, they focus on tips instead of the mechanics of trading.
- Loss Making Trader hand out advice freely to others, good traders realize that decisions are based on individual methods and do not give out tips.
- Loss Making Trader are looking for that one big winning trade to go all in on, good traders are trading good systems that they risk 1% per trade on.
- Loss Making Trader confuse bull markets for skill.
- Loss Making Trader confuse luck for skill.
- Loss Making Trader want advice, good traders want robust systems.
- Loss Making Trader run from method to method and from mentor to mentor after every losing streak, good traders know exactly who they are and what methods they trade.
Qualities of Great Trader
Great traders have really mastered a core set of skills:
1. They recognize when they are wrong.
2. They incorporate new information into their existing plans.
3. They execute at a high level. They perform.
4. They recognize when they are right, and they push their winners.
Below, I review each core competency in greater detail:
- They recognize when they are wrong.
The ability to recognize when one is wrong is very powerful skill because it allows the trader to take small losses when appropriate. The ability to manage risk well allows the trader to experiment at a low cost, gain experience, and adapt to changing market conditions.
- They incorporate new information into their existing plans.
Great traders incorporate new information into their pre-existing decisions and they use that new information to better their existing plan of action. Most traders aren’t able to make intelligent sense of brand new market generated information. Even most experts struggle to incorporate new information after they’ve made a decision. One example of incorporating new information is the trader who is stopped out, processes newly generated market information, and intelligently and aggressively re-enters the trades that are more likely to work out.
- They execute at a high level. They perform.
Most traders have experienced watching a trade that is stopped out and then starts to reverse and go in their favor but they don’t execute.Great Traders don’t delay. They act. They are able to act because they’ve worked through the mental garbage that inhibits and limits most other traders. They’ve approached the game with meta-awareness and have adapted to focus on their key trading strengths and eliminated aspects in their trading that was limiting and distracting. As a personal example, I found my performance improved dramatically when I quit worrying about where to place my stop and just entered with a fixed stop. Utilizing the fixed stop loss allows me to enter trades more rapidly which often proves a significant advantage. And, without having to spend precious brain power trying to determine the best stop loss, I am able to focus more on what the market is actually doing , what it is likely to do next, and adjust in real-time. These adjustments introduce new risks and required generating new structures for managing those new risks. In essence, great traders have incorporated a series of better designs into their trading.
- They recognize when they are right and they push their winners.
The novice often entertains the incorrect idea that it is possible to cut out the losing trades, and that successful traders simply don’t lose. The reality is that avoiding bad trades is nearly impossible. Instead of focusing on avoiding losses, great traders focus on maximizing their best opportunities. Of all the skills of great trading, the ability to push the best trades is one of the most important which is why I’ve saved it for last. Every trade has a different pay off. Most trades have probably about as much chance of making the trader money as losing the trader money. But, a smaller percentage of the trades are good trades and have a marginally higher probability of making the trader money and an even smaller percentage of the trades have a very high probability of working out. For hypothetical purposes, imagine 3 trades. The first trade has a 50/50 pay off, the second a 60/40 pay off, and the final one has an 80/20 pay off. Ask yourself, does it really make sense to bet as much on a 50/50 pay off as an 80/20 pay off? Of course it doesn’t make sense to bet the same amount when the odds are different. Yet, many traders insist on betting the same amount each time. A reasonable reason to bet the same amount each time is that varying the position size introduces difficult to quantify risk. A wholly different reason among small futures traders is that the contract sizes are so large in relation to the account that essentially they are always forced to bet the max — which isn’t desirable.
Of course, there is one more than one way to push a great trade. The simplest and often effective method is to simply add more contracts. A variation is to allow the open profits to increase to a greater degree without increasing the contracts. One can also increase the stop, target, or in general give the trade more room. All of these methods increase the risk and the potential for reward.
It is notable that the ability to take more risk when one has a greater confidence is one of the greatest distinctions between liquid markets – like the S&P 500 – and most gambling games. The market simply doesn’t care how much you desire to bet and the cost for betting more is marginal – unless you’re a huge whale. While it may technically true that you can bet as much as you’d like in a no limit poker game, you can be sure that equally skilled players will respond by simply folding or only calling when the probability of your winning is only marginal. It makes sense that great traders capitalize on one of the defining distinctions between markets and gambling games.
As mentioned earlier, great trading is in many ways dangerously close to gambling. The higher levels of aggressiveness, risk taking, and uncertainty that characterize great trading must be paired with equally rigorous risk management and performance monitoring.