There are no fail-safe guarantees for success in trading, but there are a variety of strategies and ingredients that can increase the likelihood of experiencing sustained profitability. Some of the main types of active traders can be seen in the infographic attachment to this post. All traders, no matter how knowledgeable, will eventually lose on some trades, but by utilising the most essential ingredients for success the number of losses can be minimised and offset the number of successful trades. Thibaut de Roux suggests that there are many shared traits amongst successful global traders and chess grandmasters. Traders can also learn successful traits from a variety of other professions. Identifying and realising these traits can make the difference between being a profitable trader and an unprofitable one.
Learning as a Team
Learning about anything is best achieved as a team. We learn from others, and we learn even more when we begin to teach the skills and knowledge we have absorbed to others. When we start to pass on what we have learned, we cement that knowledge in our minds. Similar to how a medical student begins their training by observing more experienced doctors, then by performing under close supervision, and then by practicing themselves and teaching others, a trader that embraces interactive learning as part of a team has the best opportunity to develop real skills that can be utilised in the markets to sustain a successful career. The PDF attachment explores the learning-by-teaching effect.
Risk management is a huge part of successful trading, and managing risk requires careful allocation of funds. The first rule of thumb with trading is to only risk what you can afford to lose. Many traders only allocate a small percentage of their available funds to each individual trade, often as little as 0.5 percent or 1 percent per trade. This limits the exposure to loss, if and when it happens. As with gambling, it can pay to set aside a specific amount of the total funds available to trade with, and setting that amount at a level that would not be disastrous if it were lost.
All markets can change rapidly at times and some are more volatile than others, but generally speaking, the middle of trading hours are the least volatile. Beginner traders would therefore be best advised to avoid making trades in the opening minutes of the market and instead sit back and watch what is happening for a while before making any key decisions. However, more experienced traders may be able to spot key opportunities in the rush hours that usually occur towards the beginning and end of the trading day. Trades should be timed carefully depending on the level of experience of the trader.
The vast majority of traders will lose a percentage of all the trades they make, and all traders will eventually lose. However, the most successful traders are able to call themselves such because they win more profit on their successful trades than they lose on their unsuccessful efforts. Limiting risk to a specific percentage of the total amount of funds allocated to the account can help to ensure that even if only half of all the trades made make a profit, the profits still outweigh the losses because each individual win is bigger than each loss. Clearly defined methods for entering and exiting each trade can help with this.
In the short video attachment, learn the difference between trading and investing.