When trading goes right, it can be a great feeling. When trading goes wrong it can be a nightmare. Fortunes are made in a matter of weeks and lost in a matter of minutes.This pattern keep repeating itself again and again.For a trader to be successful he must acknowledge this pattern and then break it.
In this Series we will try to find the difference between a winning trader and a losing trader.
1. Intraday Trading without Trading Plan
The greatest number of losing traders is found in the intraday using High Leverage provided by Brokers which is due many of these traders lack proper preparation and a well thought-out game plan. By trading in intraday where even minute error can cost a big loss especailly during Weekly Expiry , losses due to lack of knowledge and lack of preparedness are exponential. These traders are often under capitalized typically trading with a capital size of 1-2 Lakh. Winning traders often trade for Swing trades and are having capitalized account with a trading capital of atleast 5-8 Lakhs
If you are a Losing trade and want to become a Winning Trader stop doing intraday trading and focus on Swing Trading which offers greater probability of success from a statistical point of view. The same can be said for level of capitalization. The greater the initial equity, the greater the probability of survival.
2. Losing traders often use complex systems or methodologies,indicators learnt from youtube or rely entirely on Trading Tips. Remember the Golden Rule “complex” does not mean “better”.All that really matters is what makes money and what doesn’t.Winning traders often use very simple techniques which they have back tested and suits there trading personality.
3. Predict and Perish — Losing traders spend a great deal of time forecasting where the market will be tomorrow. Winning traders spend most of their time thinking about how traders will react to what the market is doing now, and they plan their strategy accordingly.If one were to ask a successful trader where he thought a particular market was going to be tomorrow, the most likely response would be a shrug of the shoulders and a simple comment that he would follow the market wherever it wanted to go.
4. Losers Hold Loser, Winner Hold Winners — Losing traders focus on hold to Losing Trades and get rid of Wining Trades as they see the Profits. Winning traders focus on holding on to the Winners proper risk management and position size. The successful trader focuses on possible money gained versus possible money lost, and cares little about the mental highs and lows associated with being “right” or “wrong”.
5. Losing traders care a great deal about being right. They love the adrenaline and endorphin rushes that trading can produce. They must be in touch with the markets almost twenty-four hours a day.Winning traders recognize the emotions but do not let it become a governing factor in the trading process. They may go days without trading if they do not get the right trade setup. To them, trading is a business. They don’t care about being right. They focus on what makes money and what doesn’t. They enjoy the intellectual challenge of finding the best odds in the game. If those odds aren’t present they don’t play.
6. When a losing trader has a series of bad trade he goes out and buys a new book or look out for a new trading system, and then he starts over again from scratch. Losing traders focus on traders who made a big trading profit , and they try to emulate the trader’s technique.When winning traders have a bad trade they spend time figuring out what happened and then they adjust their current methodology to account for this possibility next time. They do not switch to new systems or methodologies lightly, and only do so when the market has made it very clear that the old approach is no longer valid. In fact, the best traders often use methodologies that are endemic to basic market structure and will therefore always be a part of the markets they trade. Thus the possibility of the market changing form to the extent that the approach becomes useless, is very small.
If trading were a game like CRICKET perhaps novice traders would realize more readily that what appears as effortless ease of the professional trader in hitting 4 and 6 is in fact the product of endless hours spent training.