Successful Traders (Part 4)

We all know that plenty of study time is a prerequisite in becoming adept at any undertaking, and very often at that. You may find that simply studying your chosen ways and means of trading is not enough and this sure strikes a chord with me as I need to know how the Successful Traders go about their business.

I sure as hell want to know how they do it.

Bending over backwards to become a successful trader is not necessary as there is a good chance that you may end up on your butt! IF you focus on the wrong things.

This penultimate post in our short series has only five headings. The top guys don’t swamp their trading brain with all sorts of crap. Just the important things. 

 

 

Part 4: During the trade

16. THEY do not feel any pressure to make money trading

If there is pressure involved in your trading then it is safe to say that you are trading emotionally with all the pitfalls it brings to your decision making. This subject has been discussed in 100 Trading Do’s and Don’ts and is worth reading again. The link is just over to the right there.

Successful Traders

Should you have an absolute need to make money trading, if it is crucial, then you probably won’t succeed. The chances are very good that because of the absolute need to earn money NOW then you’ll be taking short cuts that you probably wouldn’t otherwise take. Which, as we know, leads to mistakes and the pressure increases. Not good.

It is always better to have a fall-back or Plan B where there is another means of making money for you to live on. Becoming homeless overnight is not an ideal situation.

Trading without the pressure to put money into the account has to be your aim. With, of course, the other headings within this series of blog posts. Such as ‘Quality, not quantity’ when identifying those entries.

 

17. THEY trade what they see, not what they think

Wow, this one still haunts me to this day.

It has got a hold of me in two or three ways. For example, the market may be in an extended uptrend and has been for quite some time. The idiot writing this still has an overbearing compulsion to go short. The market is making new highs, why do I look to go short? I cannot see any good reason to go short. The charts and my system are all screaming to go long.

Another example is that I still have a tendency to anticipate signals trying to get in early. I cannot SEE the signal yet so why on earth am I looking to enter?

Yes, I used to convince myself that something was about to occur which often didn’t. I’m lucky in that I know the problems exist and can therefore take steps to eliminate them. Those two demons are almost exorcised. Almost.

I now know that the market has no interest in what I think will happen. Nine times out of ten, what I think will happen does not. But the market does have a great interest in what my strategy says will happen – my strategy is often correct, many more times than my ‘thinking’ what will happen next.

The problem is that quite often I don’t believe what I am seeing. Stupid I know.

Therefore, I should let my strategy do the thinking for me. Most of us will agree on that one.

Successful Traders

 

You can be sure that the successful traders will not become fixated as in those two situations above.

Not one person on this planet, nobody, no-one, knows for sure, for certain, what any market is going to do in the near future. So why become attached to any direction?

Top traders know what they are looking for in their charts – it is not until they SEE it that they take any form of action.

What did the great Jesse Livermore say? “I made most of my money by sitting on my hands.”

If there’s nothing to see, then there’s nothing to do.

Trade what you see … not what you think. This is one of those very old trading cliches but so very true.

 

Bend your view to the charts, not the charts to your view.

 

18. THEY know beforehand – their entry, exit, target price

This is where your Trading Plan comes into its own. Don’t forget that it is tweakable as you follow the path of the successful traders and how they go about their business.

We need to understand that every trader, that is EVERY trader, loses money at some point. It is how you react to those losing trades. Those traders who we are trying to copy learn big time from their losing trades. They do not over-analyse and dwell on them, they simply learn from them.

The majority of traders focus on their entry strategy without much thought as to where they will exit the trades. What is your exit strategy?

It is definitely the exit strategy that makes the money, either winning trades or losers. It would seem to me then that it would be the wise trader who focuses on his exit strategy. Remember that Target Price is not always the same as Exit Price. There is a difference.

Your trading plan will detail this strategy and will evolve over time as you learn from the losing and winning trades. Will you exit at 50 pips to the good? Or exit if the trade hits your stop loss at -20? Whatever your exit strategy is, stick to it but tweak it over time as experience is gained.

The better traders will know their exits before they have even entered the trade. They will know their entry price (if it is reached), their target price, and their exit (either stop loss or target).

It is only a matter of learning from any mistakes (some trades are not mistakes, the market simply did an about turn for some strange reason), and then tweaking your trading plan to reflect what you have learned. It should be apparent to you now how important your Trading Plan is.

Do not think for one moment that it is only you that makes mistakes. Any trader worth his salt has made them, and lots of them. Making the same mistake over and over, well…. that’s ridiculous.

If the base of your trading is built on weak grounds, it is not a matter of if you fail but when you fail.

 

19. THEY close losing positions pretty quickly

This is one of the successful trader’s traits that I have copied with much success. I have no problem at all with this and can tick it off the list as complete. Let me assure you that very quickly closing those trades that look like they are not doing the business will do wonders for your account.

We have mentioned patience many times as being a much-needed virtue whilst trading. Conversely, you should be impatient with losers, by holding those losing positions far longer than you should it will only slow the growth of your account.

Oddly enough, this happened to me only last week when trading the Dax. Everything was telling me that the Dax was starting to go south, I entered from a good signal from my strategy but things started to look dodgy after a promising start so I bailed out for a -4 rather than a -12 or so. A short time later the chance offered itself again which I took for 31 pips.

The fact is, it is far better to close the trade for a few pips rather than hanging on and hanging on with the hope it will turn around. Sometimes it does. Sometimes it doesn’t. There should be, somewhere in your trading plan, details explaining that you can always re-enter the trade even after a small loss, if everything still looks good.

I do have quite a few of those small losses, but I look at them as simply the cost of doing business. If I allowed several minus 20’s to creep in then it could possibly take me a week to recoup the losses.

ALL traders suffer losses – it is how you manage them that counts. Or you could end up…

Successful Traders

Losing only matters if you lost because of a lesson you were already taught.

 

20. THEY keep a trading journal

Many top traders have expressed their opinion that a trading journal has helped them to move forward with their trading. Once on a plateau, the journal has taken them to the next level.

Hmmm.

Being honest,I must say that I have yet to keep a trading journal, relying on the Trade History on the platform and transfer those trades I’m interested in to the charts. I generally do this at the weekends simply to recap on what, why, where, when, and how I’ve been trading, and I never fail to do this. You can actually learn quite a lot by doing this exercise.

It is the wise trader who learns from his losses. The wiser trader also learns from his winners to enable him to duplicate the process, and to confirm that his trading strategy is still doing the business. This is another way to identify the set-ups that have delivered the best profits, the High Probability trades.Successful Traders

You may want to record such things as Profit/Loss, trade direction, time of trade, etc. Not me, I just want to know if my strategy is getting me into the correct trades as signalled by my strategy, also in the correct direction at the right price. My Trade Management takes care of the rest. The strategy and the Trade Management are all documented in my Trading Plan. Please notice that I mention Trade Management, NOT the stupid money management that everyone spouts off about. Manage the trade and the money will take care of itself.

So, this is all I want to know from the Trade History. I can then analyse a full week of trading and correct any mistakes that I have been making. Yes, there are still mistakes no matter how long I have been trading.

During the analysis, I do not necessarily focus on the winning or losing trades. I like to focus on the fact that every trade must be in the correct direction. If they are then I can delve a little deeper to see how my Trade Management affected the trade and what things I could improve upon.

Trading is an ongoing learning process. Please, never stand still in this respect. Keep on studying, keep on learning, keep on trading.

 

Our list keeps growing but is almost complete.

  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
  16. No pressure to make money
  17. Trade what they see, not think
  18. Know entry, exit, and target beforehand
  19. Close losers quickly
  20. Keep a Trading Journal

 

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

Successful Traders (Part 3) Before The Trade

Coming up next…

The Successful Trader Part 5: During The Trade – the final installment.

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