Over the last couple of weeks, I have written about taking
personal inventory and making the evaluations necessary to choose
where you want to be as a trader. In this article, I would like to
invite your attention to what you may or may not be willing to do to
become a successful trader. Trading can be done successfully on a
part time or on a full time basis, but it is critical to understand it
is a serious business. Anyone who trades their own money is putting
it at risk.
If I am going to put my money at risk, it seems to me that the
question then becomes what am I willing to do to try to make the risk
worthwhile. Beyond all else, I would suggest that a real commitment
is necessary. The trader who wants to succeed must first commit to
his trading as a business. InvestorWords.com defines "business" as:
"A commercial activity engaged in as a means of livelihood or profit,
or an entity which engages in such activities." Clearly, that is what
the trader is attempting to do and his activities should be treated as
he would any other business.
First, I would suggest that the trader commit time to the
operation of his business and next he should carefully formulate a
business plan specific to his own goals, needs, and current abilities
understanding that the plan can be expected to evolve as he does as a
trader. In my book, "Trade Your Way to Wealth" , I have set out
elements of a business plan and discussed how a trader might construct
his personal plan. Rarely does a business succeed without a plan and
trading is no exception.
Next, I would suggest that the trader commit himself to learning
his business. Trading can be simple and it can be fun, but at the
same time it requires effort and knowledge. Trading knowledge is not
necessarily easy to procure. Most successful traders have undertaken
to educate themselves. They read extensively, attend seminars, watch
DVDs, obtain coaching and are willing to pay what it costs in terms of
their time, effort, and money. Failure to take at least some of those
steps can result in a very expensive learning experience.
The trader must achieve an understanding of the strategies he is
using and particularly of the risks attendant to the strategy. He
must formulate an exit strategy for every trade and, in my view, that
is best done before the trade is ever entered. He must become acutely
self-aware and exercise extreme discipline. He must understand that
many trades may result in losses and that most of the profits result
from as little as 3% of his trades. He would be wise to keep careful
records and a journal of trades to which he refers regularly to keep
himself on track and assure that he is following his plan.
Focus, commitment, and discipline are key ingredients to
successful trading. Without them, the trader is not giving himself
the best chance to achieve his goals. As I have written before, money
management, risk awareness, exit strategy, and discipline are
requirements and though each may be relatively simple to understand
intellectually, they are not necessarily easy to put into practice
when confronting a fast moving market.
If you are willing to create a business plan, exercise stern
discipline over your trades, plan each trade, learn how to cut losses
and equally importantly let profits run, and have a money management
plan, you are giving yourself a chance. As with so many things, it is
in your hands. Your level of commitment will go far in determining
how you fare.
This is a business and it can be very rewarding, but it requires
work, study, and practice. It may be simple (buy low, sell high), but
that does not mean it is easy. As I suggested in the first of this
series of articles, it is helpful to take a self-inventory. See where
you have been, carefully consider where you want your trading to take
you and finally have a serious discussion with yourself to decide
whether you are willing to commit to becoming a good trader or whether
something else is for you.
Good Trading!
Bill Kraft
Success Trading Group -- by the Success Trading Group Team
Our Success Trading service delivers quality trading ideas for the elite investor that has the financial wherewithal and market nimbleness to profit on small moves in a stock's price. Become a member and you will be provided with email and/or PDA alerts intended to provide you with the opportunity to make many, many profitable trades.
Here is a play from the Success Trading Group:
McDonald's Corp. (MCD)
Our Success Trading Group members entered a position in McDonald's Corp.
(Ticker: MCD) last week. We like MCD at its current price for new positions.
Have a great weekend and we'll trade next week.
Success Trading Group Team
