Traders Best weapon
1.Control Your Ego
“Everyone wants to feel like a winner. It’s tempting to pat ourselves on the back for making a winning trade, but it’s essential to face the facts: Many times a winning trade is a combination of an astute insight AND being at the right place at the right time. In other words, external circumstances such as plain good luck make you a winner.
When you put too much of your ego on the line with your money, you may feel great when you win, but on the other hand, you may feel discouraged when you lose. When you allow your ego to enter your trading, you put subtle pressure on yourself to succeed. This added pressure could compel you to make dumb mistakes like holding on to losing trades to avoid hurting your ego. It’s better in the end to take a professional approach to trading marked by objectivity and rationality. Sure, it is necessary to have a passion for what you do, but it is not necessary to get a swelled head.”
Indeed, one of the most important things you can learn is to keep your ego under firm control so that you’re never in the position of having to protect it when you’re wrong. Doing so is usually a costly mistake, even though we all let our own egos (and yes, that includes me) get to the best of us sometimes.
2. Love your Stop Losses
“Learn to Lose Money to Make Money”:
Unfortunately, it is the sad reality that the majority of people reading this are not profitable traders. If I could single out the most common culprit for sabotaging your trading it would have to be not being able to take a loss. This is especially prevalent amongst new traders, but I’ve seen this single trading mistake cripple even more experienced traders. In fact, I’ve run across countless traders that are generally successful if not for a few outsized losses. The problem is that these outsized losses are what cripple your account and push you into the negative column. You will never be a successful trader, EVER, until you learn how to take a loss.
3. Self Examine Yourself after every trade
1) Did I trade well today? – Did I make good use of my preparation? Did I follow rules about position sizing and execution? Did I adapt well to shifts during the trading day? Was I patient in finding trades with good risk/reward characteristics?
2) What did I learn about myself today? – What about today’s trading can I bring to the next day to make myself better? How can I learn from what I did right and wrong today? What goals can I set for tomorrow to make sure that I carry over that learning?
3) What did I learn about markets today? – Did markets do what I expected? Are my views on markets any different based on today’s trade? What levels did I observe in today’s trade that can inform decision making tomorrow? What themes from today will I be tracking tomorrow?
The more disciplined you can get, the better you are going to do in the market. The more you listen to tips and rumors, the more money you’re likely to lose.
My percentage of winners is only about 50/50, because I cut my losers very quickly. I am out of a losing stock a lot quicker. I make my money on the few stocks a year that double and triple in price. The profits in those trades easily makes up for all the small losers.
If you really think the stock is going to make a big move – and that should be the only reason you are buying the stock to begin with – then there is no reason to haggle over an eighth of a point. Just buy the stock. The same thing applies to the downside; if you think the stock is going to drop, just sell it.
The single most important advice I can give anybody is: Learn from your mistakes. That is the only way to become a successful trader.