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Building On What You Do Best
A
goal of every trader is to achieve enduring success.
It's hard to achieve this goal, however. The only way it
can be done is through persistence and practice. Many
are drawn to trading, but few can actually trade for a
living. This is a discouraging fact of trading, but one
need not dwell on it. When one first embarks on a
trading career, it makes little sense to immediately
rule out the possibility of making huge profits. You
don't know whether or not you will be one of the few who
will make the grade. In the meantime, it's useful to
focus on more short-term, immediate goals: you should
focus on learning reliable trading strategies, building
up trading skills, and identifying personal
psychological limitations that may impede your
performance. And perhaps the best piece of advice a
novice trader can follow is to focus on the few key
things that one is doing right, use that as a
foundation, and then build up your trading skills, and
your self-confidence, from there.
Even the least
profitable trader does something right. For example, a
trader may know how to find a good trading opportunity,
but may not have the proper capital to make it pay off.
Other traders may leave too much of their trading plans
unspecified, and thus, while under extreme pressure to
perform, they may have difficulty executing the plan
effortlessly. Still others may use reliable trading
strategies and delineate clear trading plans, but they
may allow their emotions to undermine their efforts.
Regardless of the basic limitation, the key to turning
an unprofitable technique into a profitable one is to
focus first on the elements that are working. In other
words, perfect what you do best. Identify what you are
doing right, and make sure that you continue to do it
over and over again. For example, if you know how to
pick, and use, a particular indicator that works under a
specific set of market conditions, stick with it. Don't
move back and forth until you are certain you've
mastered the use of the indicator. Once you've mastered
the technique, you can build on it. You can focus on
other parts of your method that need fixing. Have you
accounted for all possible adverse events that may go
against your plan? Have you clearly specified an entry
strategy, exit strategy, and risk control strategy? Once
you have a few key ingredients in place that work for
you, you can look at what you're doing wrong. Perhaps
you are a little too emotional, and choke under the
pressure of executing your plan. Once you have part of
your technique mastered, such as a winning trading
strategy, you can address a different aspect of your
trading, such as gaining control over your emotions. You
can then try out ways of gaining control over your
emotions, such as reducing your position size to such a
miniscule amount that it won't affect you emotionally.
You may want to use the automatic settings on your
trading platform, or leave specific instructions with
your broker. (Remember, at this stage you're just trying
to build up your skills; you don't have to be profitable
yet.) Again, the key is to identify the parts of your
trading methods that work, and make sure you do what
works consistently without alteration. Once you're
absolutely sure that you have these key components
mastered, you can then move on to fixing other parts of
your technique. But don't make the mistake of trying to
change too much at once. After you find something that
works, stick with it.
Many seasoned
traders, in recounting how they learned to trade, say
they took the greatest hits to their trading account
when they tried to trade in market conditions where they
had not yet developed solid, reliable skills. For
example, a trader may have mastered trading only during
the first few hours after the markets open. Rather than
sticking with what they did best, they moved on to other
methods too quickly. Even though they had made
consistent profits during the opening hours of the
markets, they decided to trade during the close, a time
when they had no experience. When they tried to trade
the close, however, they lost money. It's important that
one try to expand one's skills by trying out different
strategies under various market conditions, but it is
also important to take small steps. Wait until you are
ready. Don't move ahead too fast.
Trading
profitably requires self-evaluation and practice. It's
necessary to identify which parts of your method are
working and which parts are not. The key to improvement,
however, is to identify what you are doing correctly,
and slowly building upon this foundation. By doing what
you do best as much as possible, you'll soon develop a
method that will produce consistently profitable
results.
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