The essential elements to be a successful trader are:
1. An Effective System
The first and the foremost thing one needs is an effective trading system. A good trading system should be both profitable and fun.
An effective system means a trading system or methodology which has demonstrated history of success in all types of market conditions and which contains definitive, objective, operational rules.
2. Risk Management
Risk management is very very important element of any successful trading system. Proper risk management system is one which takes you out of losing trades early and keeps you in winning trades for as long as possible. Ordinarily this task is part of the trading system, however, traders often override their trading systems and, therefore, need a fail-safe procedure.
This element includes self control, persistence, positive attitude, and more. Last, but certainly not at all least:
4. Trader Psychology
It mean self-knowledge, and the ability to resist one’s emotions even in the face of losses. If you can master or even come close to mastering all four, then you will achieve consistent success as a trader. Moreover, you will avoid the boom or bust syndrome which afflicts so many traders.
Whether you’re a newcomer to trading or an old hand in it, you are most likely one of the many individuals who would like to improve, who is motivated to improve, but who doesn’t know how to begin the arduous task of changing your behaviors.
Here are some suggestions as to how you may embark on the road to lasting profits:
Examine your trading results by looking at your statements and attempting to determine why you made the trades you did. This will let you know at once whether your trades were at all systematic or if they were based on a whim, on emotion, on tips, rumors, fear, or greed.
If you’re like most traders then you’ll find that a relatively small percentage of your trades were the result of a system and that most of your trades were prompted by other factors, most of which were totally unrelated to any definitive system, method, or indicator. This will alert you to the first problem area in your trading. It will let you know, without a doubt, that you are not basing your decisions on a consistent approach.
What to do?
Begin looking for a system which has simple, unambiguous rules of application. In finding a system consider the following aspects of paramount importance:
The rules must be simple to understand, simple to follow, and not subject to interpretation.
B. Historical accuracy
should be 55% or more. While it is entirely possible to profit using systems that have less than 40% accuracy, it makes things more difficult. So shoot for a higher percentage.
Use a system that has been tested in various markets – bull, bear, sideways, choppy, etc. At least several hundred trades should be included in the test. The fewer the trades, the less likely the results are to be representative of reality.
Whatever the trading system/plan you follow, the most important thing is – follow it religiously.
If you have any insights on the trading plans, do mention it in the comment section below. We would love to share it with our readers.