Successful Traders (Part 3)

We’re really cooking on gas now – steaming along no less.

If you haven’t started to work on these headings yet, please don’t delay. I have made a good start on them. It doesn’t matter how long it takes just so long as you’re working in the right direction. It really will pay off in the long run. Try to emulate the successful traders.

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Part 3: Before the trade

12. THEY trade on their OWN decisions

It’s said that any chart of the markets is simply a graph of fear and greed. I believe it. 

Sometimes, that fear, or greed, will tempt us to try other means of trading such as listening to the financial gurus on TV, or those in the newspapers. Can you imagine Warren Buffet or George Soros, or any very successful trader ever taking trading tips from such a source? They wouldn’t dream of it.

They listen only to themselves, they let their methodology show them the way before making their own informed decisions, because they have confidence in their own ability. The work that they have put in over the years is paying off, so why listen to some talking head on the financial programmes?

Find out what greed means in a trading sense. Patience and Discipline too. All three can and will affect your trading decisions at some point so the sooner you become aware of them, the better. They really can play havoc with a trading account.

If it is you who pulls the trigger, and it is your account, then the buck stops with you. You will reap the benefits, or otherwise. Therefore you must take responsibility for your actions by making your own trading decisions.

 

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Leave greed where it belongs. Where exactly does it belong, (in the kitchen)? Concentrate on position sizing and nibble away at the market, getting rich slowly. Those small profits soon build up once you employ position sizing and kick greed out of the window. Not only that, but it is a much safer way to trade. Your confidence will grow as your account grows. But NOT over-confidence…

This particular heading in our list was mentioned by a quite a few of the successful traders – you must think for yourselves. Do not listen, or take advice from others.

Successful traders are committed people, they are confident in their own abilities. Why on earth would they need to listen to some half-baked idiot spouting trading advice after all the hard work spent devising their strategy and trading plan?

Yes, the gurus come across as very knowledgeable and present their case very well indeed. But the fact remains that no-one, absolutely NO-ONE, knows for sure what the market will do in the next minute, let alone the next few days.

It IS a very hard skill to acquire, trading, but the tools and knowledge are there to help you make your own trading decisions. Those gurus only look at the same tools with the same knowledge, hopefully.

 

The average man doesn’t wish to be told that it is a bull or a bear market.

What he desires is to be told specifically which particular stock to buy or sell.

He wants to get something for nothing.

He does not wish to work. He doesn’t even wish to have to think.

::: Jesse Livermore

 

13. THEY think for themselves, never EVER robots

Again, give those financial gurus a wide berth and think for yourself. The guy on the other channel is probably saying the opposite anyway. It’s not unknown.

The successful trader thinks for himself and will make his own trading decisions not particularly on what he thinks, but on what he sees, on what his strategy is telling him, and …. not until it has told him.

On another subject, who hasn’t been tempted to purchase one of those trading robots? Well…. me, for a start.

 

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Otherwise known as EA’s, or Expert Advisors. You simply plug it in and it spits out lots and lots of dollars..!!

Well, so the snake-oil salesmen will tell you. Though I must be honest and say that I have never used one and never will. My brain simply told me, after a lot of thought, that there is no possibility of them working – ‘over a period of time’ – and they will eventually lose you money in the long run.

So, as I have no experience, then I cannot say too much about robotic trading. Only that they really do not appeal to me at all. 

 

They give you the impression that this happens…

successful traders

… and you will have this…

 

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… but in reality – this is what you will probably end up with

 

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Just ask yourself why banks and trading houses spend a fortune and pay obscene bonuses in employing the best traders that they can find. If any trader doesn’t cut it then they are fired, pronto. Why don’t they just purchase an EA?

If any EA or trading robot did actually work then the banks would have them all sewn up. Please give them as wide a berth as possible.

Though they will teach you to become an expert in curve fitting every day as you alter the parameters to yesterday’s market which doesn’t apply today.

Think about it.

Also think about this. In trading only one or two pairs, or whatever, don’t you often get a ‘feel’ for what may happen next? A ‘gut feeling’ that seems to be correct more often than it isn’t because you spend most of your trading time on those two pairs. You have become attuned to your chosen pairs.

Or maybe it’s the set-up even if you trade all the major pairs. You’ve seen that type of set-up many times before and subconsciously you tend to know if it will work out or not. A successful trader will NOT trade EVERY set-up that occurs, but the ones he feels comfortable with.

Robots cannot be discretionary. They are programmed to ‘see’ a set-up and then trade it. No thought at all goes into it. Not to mention position sizing as your account starts shrinking fast!

It would seem to me that people want to trade but do not want to learn about trading. So off they go and buy a stupid robot. That isn’t trading at all. If you must buy one of these infernal things then please please do your due diligence. Half an hour spent on google searching will be time well spent and could save you a fortune.

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Some robots are better than others..!!

The simple fact remains that whatever you have between your ears is the best trading tool you can ever hope to possess. It is entirely up to you to hone its trading skills and let IT see and make the decisions. The successful traders rely on their own thought processes.

This is one of our items on the list that I completed years ago..!!

No robots for me, ever….

 

14. THEY do not spend endless hours analysing charts

I spend most of the trading day at my pc though I can assure you that I am not analysing the markets. I have several tasks such as emailing, our Trading Room, our Trade Copier, running the website and the problems associated with it, running a business, etc, etc. Mucho other stuff too. If things are quiet I may even watch a film.

BUT as soon as I hear an alarm then everything stops, the film is paused, and my trading hat goes on.

I have two screens and the charts are pulled up on both. A higher time frame and a trading time frame. I have NO need to analyse, I know if there is a trade or not within a few seconds. If it looks interesting then I’ll take a closer look.

To repeat, there is no way that I am in the top group of successful traders – what I am doing is simply copying them and their traits. I WANT to be in that group and will do whatever it takes to get there. I’ve been a member of the group where they all do the same things year in and year out and it is painful. Just go to Forex Factory and you’ll know what I mean. Yes, I was (past tense).

I do spend some time in the evenings and often at weekends scrolling slowly through charts checking that my strategy is good. Looking at those potential entries that worked and those that didn’t. More importantly, why did some work and others not? Sunday evenings are a good time as it keeps fresh in the mind ready for Monday’s battles.

I’m not a gambling man (usually) but I’ll bet that you analyse the markets far more than any pro trader.

So how do successful traders do it? The next heading will tell us.

 

 

15. THEY look for quality, not quantity

This is where the patience factor comes in.

“Oh yes Fred, I’ve had a busy month’s trading. About 50 trades in all but managed to just about break even. Eight of the trades were absolute beauts.”

We can analyse that sentence such as just about broke even means he ended up losing big time. I’ve heard this phrase many times from those who gamble on the horses. Actually, the betting companies are not making money cos everyone is breaking even!! Yeah right.

“Eight of the trades were absolute beauts.” What about the other 42? Hmmm, they took care of any profits that were made, and then some.

This is where the successful traders become successful traders. They take only the trades that show the most promise, and not trading for trading’s sake. So how would the successful trader speak in that same situation?

“Well Fred, I’ve had a busy month’s trading. I took exactly 12 trades and managed to make a decent profit. Eight of the trades were absolute beauts. The others were break even trades or showed a small loss”.

The successful trader made good profit from those eight trades but cut the other four when things started looking dodgy, i.e., by following his Trading Plan…..!!

The fact is that more trades does NOT mean more money or pips.

Successful traders

Focus on quality

Take fewer trades

Over trading IS an account killer. If you are not making money then the chances are that you are taking far too many trades. You may have a patience problem. If you do then I hear you. I really do.

I don’t seem to have a problem with patience these days in waiting for the correct set ups, those High Probability Trades (HPT’s) that grow your account nicely. But I’ve worked on it for many years, it is not easy. 

In taking far fewer trades your win rate will probably start to rise, this will inevitably increase your confidence and feeling of well-being in your trading life. All the hard work is starting to pay off at last and you now know exactly what you are doing. Great stuff.

 

A trader should look at a chart for what it is, and not for what he wants it to be.

 

Our list continues to grow of how to become a successful trader:

  1. No ego trip
  2. Organised
  3. Responsibility and discipline
  4. They are realistic
  5. Very patient
  6. Always willing to learn
  7. Don’t rely on news
  8. Don’t rely on indicators
  9. No 24/7 trading
  10. A Trading System
  11. A simple Trading Strategy
  12. Make their own decisions
  13. Think for themselves
  14. No over-analysing of charts
  15. Quality not quantity

 

It was about at this stage, I seem to recall, that I realised what is going on after I had been studying these headings in our list for quite some time.

The top traders simply DO NOT do what the rest of the retail traders are doing. When you consider that 95% or more are losing, then why would you want to copy them? Seems a bit silly to me.

I’d rather copy what is on this list, i.e., what the winners are doing.

 

Link to other posts in this series so far if you missed them:

Successful Traders (Part 1) The Trader

Successful Traders (Part 2) The Method

Coming up next…

The Successful Trader Part 4: During The Trade

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