Tackling every market situation with proven tactics and decisive actions are the first steps in a trading career. Itís time to take the next move. Below I will list a few of the core principles and strategies that have proven steadfast and central to my trading profession. After you have taken them into your own repertoire of trading techniques, I am positive that you will have similar feelings.
When a trader is looking to make the big bucks there is one single strategy that severely out-weighs all others. Of course you must trade to make money, but following advice to ìtrade more to make moreî will only leave you flustered and behind. Real money is made once a trader slows down and decides to go after only one market.
When it comes down to it, the best trading system is simply that, simple. After all, how great can a trading system be if it paralyses your decision making and leaves you second guessing? Too many indicators and over optimization are the number one culprits of an over-complicated trading strategy. There are times when an over optimized plan will perform well; such as in historical data. However, it said system performs poorly in real time than it isnít much of a system, is it?
Do you have your stock trading systems documented and penned? If not, then you will only get so far as a trader. Every single long-term successful trader that I have ever met documents their winning trade systems. Take the time to write the entire methodology that led to your success. Why do you need to bother? In order to trade you must have a perception about the market. Commit to that perception by writing down your thoughts and strategies. By taking that perception and claiming it as yours you risk the opposite outcome of being incorrect. There will be no bones about it since it is written in black and white, and that is the point. Hold yourself accountable, and a revived sense of dedication will arise to better your trading system in similar future market conditions.
One of the most helpful ways to add insight when perceiving a market is to back test. Back testing takes historical data and tests would be outcomes against the best strategies of today. Of course results are not 100% accurate since past conditions can never be exactly repeated. However, there are significant insights to gleam. Similar price movements and patterns occur over time. Why not test your trading systems against a historical period similar to todayís market? There is always time to allow for researching for invaluable market data.
Letís face it, trading confidence is invaluable. But how is one to gain this confidence when trading experience is slim? Back testing. Various trading systems help to read the market, but they only add confidence once acted upon. Whether you employ the candle sticks, moving averages, Fibonacci retracements, volatility breakouts or other trading systems is up to you. However, gaining trading confidence is also your job, and with back testing this confidence grows by leaps and bounds compared to those who choose to skip the method.
To quote one of the most world-renowned, professional trading consultants and coaches; Perhaps the greatest secret to top trading and investing success is appropriate trading money management, but sadly this describes very few traders or investors. It is a fact that proper money management is ragged among traders and investors. To achieve real success, superb money management must be enforced.
Can I tell you a secret? I call it a ìsecretî since there is so little correct information available about this subject. And this includes authorís who have written books about the matter! Some circles call it ìdiversification,î other ìrisk control.î It is commonly known as ìwisely investing your money.î Whatever you call trading money management,î know that its power is not in its name, but in its simple algorithm.
Bear with me as I paint a picture for you. Trading and conventional businesses have important similarities worth explaining. To have a successful business statistics must be kept on almost everything. This includes everything from potential customers, sales or conversions down to the average dollar per sale. Before any changes are made to the business they must first know the base line. This perfectly describes trading.
Before taking your trading to a serious level of any kind, and actually before you do any trading at all, implement statistic taking. Without statistics there is zero chance for improvement. Any change made is exactly the same as gambling in Vegas. Sure, people do it, but they also know the house always wins. Trading is a business and statistics such as R multiples, win loss rations, expectancy and a few other statistics must be tracked. If you need a starting point to learn more about trading statistics read Dr. Van Tharpís book Trade Your Way to Financial Freedom.
At last, you have a back tested, hearty and the best trading systems ready to go. Money management is no longer a worry, as you understand how to properly handle it. You understand the market and are confident in your techniques. You have successfully maximized your trading potential, congratulations! You are about to enjoy hard-earned success that will leave others wondering how you did it.
