Becoming a Better Trader: Five Keys to Trading Success

How to be a Trader: Five Keys to Successful Trading

These 5 Keys will help you become a better trader today.

What does it take to make consistent money as a trader:

Discipline,
Focus,
Patience,
Intelligence.

There is also the mental game of trading. Keeping one’s ego in check is always a struggle even for the best traders.

My aim is to recommend products that will truly benefit you. I believe in transparency and want to disclose that I’ve included certain products and links to those products on this page that I will earn an affiliate commission for any purchases you make.

“I wait until there is money lying in the corner and all I have to do is go pick it up.

I do nothing in the meantime.”

-Jim Rodgers – MarketWizards

Here are five keys to improve your trading today.

1. Know the Markets

“A prudent speculator never argues with the tape.

Markets are never wrong, opinions often are.” – Jesse Livermore

Trading can be viewed as a war between you and another trader. The only difference is the knowledge you possess.

How much information do you have about the markets?
What makes them move?
What strategies can be employed to take advantage of market movement?

If you are well-armed, your confidence will increase as you go off to engage in battle. Increased confidence leads to lower stress and higher profits.

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2. Have Acceptable Trading Capital

The toughest problem is to establish a sufficient capital base to begin trading effectively.

Most people are constantly struggling to pay their bills and save a little money every month. Putting their savings on the line can be very stressful.

In fact, not having enough money is the primary cause of stress for an investor.

Investing or trading with very little capital is a dangerous situation. A trader must be willing to lose some money in a trading account. Do not use the rent money to trade or you will assure yourself of failure.

If you have enough money in you account to be able to absorb a few losses, you”ll be able to focus on winning instead of worrying about losing.

According to Jack Schwager, the author of The Market Wizards (basic training for all serious traders), the most common trait for all successful traders is to avoid thinking about money when trading. Of course, this is easier said than done.

However, successful traders have managed to remove money from the trading picture and eliminated it as a source of stress.

3. Set Reasonable Expectations

“People who look for easy money invariable pay for the privilege of proving conclusively that it cannot be found on this earth.” – Jesse Livermore

You don’t have to be right all the time to be profitable.

For most styles of trading like

forex,
options,
swing trading,
and day trading,

You don’t even need to be right 50% of the time. The trick is to set and sustain a reasonable level of consistency. Keeping track of your winners versus losers is critical.

For example, some traders look to have a ratio of $3 in gains on winners vs $1 of losses for a loser. This way, even if 60% of the trades are losers, they are still profitable. Of course, this depends on the style of trading.

“Losing money is the least of my troubles.

A loss never troubles me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocket book and to the soul.”

-Jesse Livermore

4. Understand and Assess Risk:

“If you can’t sleep at night because of your stock market position, then you have gone too far. If this is the case, then sell your position down to the sleeping level.” – Jesse Livermore

There are three general market directions: market up, market down, and market sideways.

It is important to assess potential market movement when you are placing a trade. If the market is going up, you can buy calls, sell puts, or buy stocks.

Do you have any other available choices? Yes, you can combine long and short options and underlying assets in a wide variety of strategies. These strategies limit your risk while taking advantage of market movement.

Limiting your risk is the name of the game. It is by far the most important part of setting up a trade. However, I am constantly amazed by how many traders do not know how to accurately assess the risk of every trade they place.

If you are simply buying stock, the risk is the stock going to zero. If you are short selling stock, you have unlimited risk potential. Options can provide necessary insurance to limit your risk.

Two rules of trading:

Always calculate the risk of a trade before placing it.
Never take a risk unless you can afford to lose the money involved.

Trading is about probabilities. Using these rules, you have a higher probability of limiting your risk and increasing your chances of becoming a successful trader.

5. Review Regularly

“A man must study general conditions, to seize them so as to be able to anticipate probabilities.”

-Jesse Livermore

How often you should review your overall performance depends on your trading frequency. If you make fewer than five trades per month, for example, a monthly or quarterly review should be sufficient.

If you’re trading every day, on the other hand, you should check in more often.

The important thing is to make it a regular habit. Consistency and discipline are the hallmarks of successful traders. It’s important to carefully study your strengths and weaknesses as a trader.

Trading should be a lifelong endeavor. The best traders are constantly learning and trying to improve. The only way to lose in trading is to ignore risks or to quit.

Ally Deal for New Accounts: Free Trading +Cash bonus

Ally Invest $3,500 Bonus – You can earn $3,500 brokerage bonus + 90 days of free trading from Ally Invest when you deposit $10,000 or more into a new brokerage account by November 30, 2018.

Accounts will receive the specified credit, depending on the initial deposit amount, deposited into the account within 10 days of meeting the qualifying requirements. Once the account is credited, the bonus and initial qualifying deposit is not available for withdrawal for 300 days after the requirements have been met.

With a Ally Invest account, you can gain access to the trading tools, guidance, and resources that can get you the best start for retirement. This site is known for giving great pricing for trades and knowledgeable support to all of its customers.

To earn the 90 days of free trading, you must fund your account with$10,000 must remain in the account (minus any trading losses) for a minimum of 90 days from date of funding account or Ally Invest may charge the account for the cost of the trades credited to the account. Receive $500 in commission credit to your new account for equity, ETF and option trades executed within 90 days of funding the new account.

If you open a $10K Account, you receive a $50 Credit plus free trades up to $500. A nice savings. Learn more here.