The most successful traders are the ones who have a few traits in common with the common people.
Some of them are like you and me too.
If you're like me, you might not agree with all of the observations made here, but that's fine. The point of this article is not to debate the merits of certain ideas or to get into a bitter argument about the value of investing. I'm here to discuss some patterns of behavior and attitudes that are common to successful traders and the first is being like me. I believe these observations can be used to help you avoid some of the same pitfalls.
"We always lose the first time we trade."
This is a common refrain among new traders. It's a bit hard to understand why we get crushed the very first time we step into the markets. After all, they say there are only a few trades that count. Here's what happened that time.
We first chose a market and held it until we decided to exit the position. Then, we looked for a potential exit. In the days leading up to the first trading day, we spent a lot of time watching the markets. We kept our eyes glued on what was happening in the stock market as the market closed. We kept an eye on some stock that we have been tracking for a while. We scoured the stock market for an opportunity that would appear to have some merit. At one point, we found an opportunity that seemed very attractive. We were looking for a value trade because we thought that if the stock didn't move much, then the price of our index fund would also remain the same. We were getting close to the end of the trading day and the trade looked good, with a high probability of success.
We decided to go for it. We pressed the enter button. We saw the light turn off on our trade. We looked at each other. We were stunned. Where did it go? We watched the market as it rebounded from the lows to reach new highs, then the market fell back down. We felt dumb. Then we scoured the market again, finally discovering the trade that it happened off the chart. It was a one day anomaly. The market is very fluid, even in these volatile times. Anomalies occur frequently. We decided not to take the trade again.
Our point, is that we are human. We make mistakes. We have emotional attachments. We want to win. When we have these attachments, we will focus on the winning trades and miss the opportunities that are available on the losing trades. When we take good trades and miss opportunities, we will miss opportunities when we are busy doing the winning. We need to have a clear mind as we watch the market.
So, when we get on the market, make sure we are clear on our objectives, make a list of the trades we want to make, then watch the market. Make sure that our rules are clear. Know our objectives. Be patient and disciplined enough to wait for the right opportunities. Keep our eye on the prize. Don't get caught up on the daily noise. Let the market work for us and ignore the opportunities that occur every day. If we miss opportunities, we miss them on the losing trades. If we catch an opportunity on the winning trade, we miss it on the losing trade.
If you catch an opportunity on a losing trade, you need to be decisive. Get off the trade immediately. If you catch a good trade, move fast. Make the trade and keep the trade.
If you can master staying on the winning trades and not losing sight of your objectives, your trading is definitely going to improve.