What some vision are massive profits dancing in their heads when trading the financial markets from home. They see themselves in their home office as professional profitable traders, the rat race long behind them, trading the markets for just several hours a day. The ideal lifestyle.
In today’s financial market environment, those who swap their jobs and decide to trade stocks, options, the forex, commodities, or any other securities for a living, are instantly attracted to the potential of they making tons of money.
What’s often overlooked is the strict mental discipline that’s needed to make money on a consistent basis. As a result, a high percentage of retail traders will crash and burn, their trading capitals being wiped out.
The reason being that they didn’t have a trading plan or the dedicated discipline and mindset that’s needed to become a successful professional trader.
Fortunately, there are now a wealth of resources and information that’s available to adopt the proper mindset for the novice trader. What needs to be first learned is where to start.
Know The Industry Language
What initially needs to be understood is the language of the particular financial market and industry. Learn what a call or a put is, understand what stop limit orders are, or what a “handle” means.
If you come across a term that you don’t understand, then find out what it means, study and completely understand it. It becomes difficult to understand what a veteran trader is teaching, if you don’t have a clue what the basic terms mean.
Understanding Price Action
What’s required is learning, understanding, and reading price action of a financial instrument. “Price action,” is the basic language of a stock or a given market.
It tells you what its done or how the market has performed and likely to do in the future. Know and understand how to read the trends on a chart. Is the particular stock in a long-term bullish trend or not.
Are the current oil prices in a bear or bull market. Is there evidence of a potential trend change from an intermediate bear market. First learn the lingo, then learn how to read price action and understand it concisely.
Controlling Your Risk
What all successful traders know is how to protect and preserve their trading capital, as that’s their lifeline. They also understand the nuances of the markets and how to understand and control risk.
What all long-term successful traders have managed to do is survive the passages of time, and managed to make money and increase their trading accounts. The core foundation of this is they knowing how to control risk.
There are instances of hedge fund managers who went short on the German mark, this when the Berlin Wall came down, but survived by calculating their risk, making record returns on their funds that year.
One trader went long on the Dow futures when the September 11 terrorist attacks happened, and went on to beat the returns on the S&P 500 that same year.
One trader went “long” on a variety of oil and refinery stocks, this when Hurricane Katrina hit, and still made money as those stocks began to plummet, this since they knew how to manage risk and their trades.
The “lessons” being that these professional traders managed their accounts and risk to make money in seemingly disastrous circumstances. So what needs to be learned is how to assess and manage risk. What will be increased are your odds in becoming a better trader.
Always Have A Edge
What professional traders also have is a distinct “edge” when they trade. This edge is anything that gives them an advantage that others don’t have. The more advantages that they have the better.
An edge can be reading the charts better than someone else, recognizing breaking patterns, superior stock selection, concise discipline, better money management, etc.
There are successful stock traders who has several “edges” who are able to propel their modest starting accounts into millions, so the key becomes to finding your particular set of edges.
There are successful outstanding traders among us who has achieved records for the greatest extraordinary returns in the quickest time. Study these great traders and then you’ll get an idea of the edges that they’ve used to become these trading legends.
Developing The Discipline
What’s required is developing a shrewd strict mental discipline along with emotional balance, as it’s known that trading is all about mental control.
You can give two traders the exact trading system, the same capital in their accounts, the same market to trade, but invariably, they’ll end up with different results.
The reason for this is their mental and emotional mindsets, why one will become successful with the same set of circumstances while the other may not.
One trader may experience extreme anxiety which causes them to exit their trades too early, hesitates when there are entry signals, or will take profits far too early while missing the big moves.
The other trader may have developed the discipline and the control to take each and every trade as they are, independently, the only focus being placed on following the trading system. This trader knows the exact amount of losses they may incur, while taking advantage of realizing profits if the market runs.
What the successful trader uses is strict mental discipline along with emotional control. They’ll take each trade independently while quickly forget if the previous trade was profitable or a loss.
Trading For A Living
Trading the financial markets can be the hardest way to make an easy living. There are certain skill sets which needs to be adopted to become successful and profitable.
What’s required is to know yourself. Know if you’re cut out for it, if you have the mental discipline, the precise focus and the stomach to trade the markets to make consistent profits.