Four areas to cover in trading

Four Areas You Must Cover http://www.netpicks.com/4-areas-you-must-cover/

Throughout my relationship with Netpicks I have communicated with

many traders and those who entertain visions of becoming a profitable trader.

What is quite staggering is the number of people who are not equipped for the road leading to trading success.

What do I mean by equipped for trading?

It's not that I think I am an excellent judge of potential but it's what people say (or don't say) that tips you off that

trading is probably not for them.

One thing I ask people who want to have a conversation about trading is

what their goal is for the conversation and what they expect to get from it.

The common reply is "just to talk" or "see how you are doing in trading" and then I ask what their trading goals are. I usually get an answer that is about as useful as the answer to their reasons

for wanting to talk.

If you were to have a conversation with a successful business owner, they

can tell you what their goals are.

Professional athlete? Ask them what their goals are for their training and

the answer will be anything but vague.

Throughout history, those that find true success have identified their goals and have set forth with a plan to attain it.

The following four points are something I jotted down a few years

ago after reading one of the many trading books that litter the landscape. The author escapes me but I did find

usefulness is some of what was written.

You have to establish goals for your trading.

Without them you are drifting blindly through a business that has

participants that are highly skilled and want your money. The goals cement

you to a path and can, if followed, keep you on a track to success.

They keep you focused. What do you WANT from trading? Yes, money but what will that money give you? How

will it make you feel?

Whatever market(s) you are going to trade, understand them.

What makes up the market you are wanting to trade? What fundamentals drive the bias of market participants?

Even if you use straight up technical analysis, knowing what "drives" the

market can give you better insight so you are not trading blind.

You need a trading strategy/trading rules.

It goes without saying that these rules and trading systems must have an "edge". Have your trading rules

specify what makes a valid trade.

Ensure that money management is thoroughly understood. Your rules are

what is going to assist you in being able to take a piece of the trading pie.

Finally, follow the rules that you have laid out.

The hardest part I find in trading is to follow the rules. I don't fall too far off track but just today, I bought into an area where the probability of price advance had not made itself clear.

It's not something I usually do and it cost me a full position loss. Price did

not advance far enough for me to tighten my stops.

The discipline to follow your rules consistently is hard to keep for a few reasons such as emotions and bias. For me, today, it was an assumption that price would going to advance

even though I was missing signs that it was going to happen.

I have seen some underestimate the psychology aspect of trading however

for the majority, that is what does people in. Not just in trading but

emotions in every day life can make a good day become a bad day very

quickly.

The snapping at the clerk who messed up your order.

Yelling out your window to someone

who cut you off in traffic.

Raging at the neighborhood kids who trample your grass

There is that moment between the impulse and the act where you can actually decide how to react. It is

brief, but it is there.

You can't fight emotions as they are in us.they have been here since the dawn

of man. You have to accept them. Once you accept them, you can find

alternatives to how you handle them. In doing so, you serve your trading.

For today though, it wasn't emotions that made me take the bad trade

although I did break rule number four. It was being overconfident thinking that I knew what was just about to

happen and then throwing my trading rules away and improvising.

Set your goals. Know your market.

Know your system/rules. Follow your trading rules.