Have you ever wonder why 95% of new traders failed in making money through trading in any financial instruments despite they are many advanced charting software in the market and the online brokerage fees are low.
As you can see, the problem is not a result of what the market has done nor the types of products or services the traders are using. The main issue here is all about the trader himself/herself and nothing else.
For any new traders who want to start their own trading business, below are five main areas that they would have to work on.
1. Know yourself
First thing first, knowing yourself is the most important aspect of trading. As mentioned in Most Important Thing, getting to know yourself will save you from unnecessary fear and stress.
2. Mindset
Very often, people jumped into trading after attending some seminars or workshops, thinking that it is a get-rich-quick scheme. Well, in reality, it is far from that.
Just like any other businesses, you have to treat trading as a business regardless whether you are doing it full-time or part-time. This means a business plan is needed as well as lots of hard work in order to make it a success.
3. Trading Plan
By and large, trading plan is the most important aspect of actual real money trading.
In any trading plan, the following items have to be documented clearly prior to using the plan.
- Objectives : How much you want to make
- Instrument : Stocks, Futures, Options or combination
- Time frame : Day Trade, Swing Trade, Position Trade
- Setup : Chart type, Indicators, Patterns
- Entry : Breakout, Pullback, Strike price
- Exit : Initial cut-loss, Trailing stop, Target
- Risk Control : Scale in, Scale out, Rollover
- Money Management : Capital allocation, Sizing
Any trading plan should be on going and constantly evolving to meet your goals. Of course, things will have to be developed over time as you gain more knowledge experience.
4. Discipline
Does knowing yourself well, getting the right mindset and having a detailed trading plan guarantee success in trading. Well, the answer is almost a ‘YES’ if the trader has the discipline to follow the plan faithfully regardless of any situations or conditions.
However, if the trader does not has the discipline, for example, to cut loss where he/she has to, then there is no point having a complete trading plan but never gets to follow the rules stated in it.
So, always remember this : “Plan your trade and trade your plan”.
Failure to do so means the trader is planning to fail!
5. Perseverance
In trading and investing, no one has ever won 100% of the time. In fact, for new traders, they were always a time in the beginning where he/she felt dishearted by the number of lossing trades and the amount of money lost in trading.
From that point onwards, three scenarios could happen. In the first scenario, the trader quit immediately thinking that trading is a scam or felt that trading is not suitable for him/her. In the second scenario, the trader continues to learn and put in more effort to improve his/her trading. However, as time passed and not much improvement are seen, this trader too gave up and quit.
In the last scenario, the trader continue to do whatever it takes and treat every failure as a valuable feedback. With all the hardwork and perseverance, the trader continue to fine tune his/her mindset, plan and methods until the day where vast improvement and success is seen.
Finally, I would want to end this section with a quote from Albert Einstein:
The definition of insanity is doing the same thing over and over and expecting different results.
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