Diwali Greetings

Traderji · #1 11th November 2004, 09:29 PM

Dear Member of Traderji.com,

DIWALI GREETINGS and BEST WISHES for a PROFITABLE NEW YEAR!

I would like to use this ocassion to share some of my thoughts with you all in your quest for profits.

Two key words you often hear in trading are consistency and discipline. A winning trader makes consistent profits. Here's what that means. In contrast to seasoned traders, novice traders' equity curves goes up and down, but mostly down. The equity curves are jagged and show extreme peaks and valleys. A seasoned trader, in contrast, has a smooth, rising equity curve. That doesn't mean that a seasoned trader doesn't run "hot" and "cold." But what they don't do is allow their emotions to guide their trading. They don't impulsively abandon their trading plans, panic at the wrong moment, or make numerous trading errors. When they happen to hit upon ideal market conditions, they are able to take advantage of them, so that over the long run, they come out ahead.

How do you trade more consistently? One of the first steps is to develop clearly defined trading plans and try to stick with them. Discipline means that you learn to follow the trading signals consistently.

Trading successfully is a matter of taking advantage of chance. To take advantage of the law of large numbers, you must make many trades, and do so consistently. Ideally, your objective is to try to put on a trade with discipline, reacting effortlessly over and over again. By chance, your plan may work, or equally by chance, it may not work. If you use a sound, reliable trading strategy, however, you will be right enough times to make a profit across a series of trades.

What happens to many novice traders, though, is that they allow their emotions to take over at critical moments of trading. They may jump into the markets before they are ready because they crave a little excitement, or they may close out a trade early because they are afraid of losing money.

Even traders who have a well-devised trading plan may not follow it out of fear or greed. When this happens, a novice trader will lose money even when the market conditions favor their trading methods. They lose money when they should have been making money, and then, when the market conditions change, and are not conducive to their methods, they lose even more money.

They may occasionally hit upon those moments when everything "clicks" and make a profit, but it is usually short lived. It is vital to control emotions when trading. Don't act impulsively. Identify when you are uneasy or fearful, and take steps to reduce the fear. For some people emotion control may be as extreme as standing aside for the day. For other traders, it may mean working out regularly and using meditation or relaxation techniques to remain calm. Perhaps the best method of emotion control is to manage risk.

If you know that the outcome of a single trade can have relatively little real impact on your account balance, you won't be as worried and you'll trade more freely. Finally, don't trade beyond your skill level. If you stick with what you know initially, you will be able to build up your trading skills and confidence level.

Master traders know that they have a few foolproof weapons in their arsenal of trading methods that they can use to recoup major losses should they need to. Once you realize that you can make lost money back if you need to, you'll feel a sense of freedom. You'll know that should you experience a drawdown, you can get back in the game. And in the end, there is really nothing to worry about. Until then, however, you must practice trading conservatively until you build up the requisite skills.

The best way of doing that is to develop a trading plan and follow it. Trade with money you can afford to lose and manage risk carefully.

By building up your trading skills and developing a strong sense of discipline, you will eventually develop the ability to trade profitably across a variety of market conditions, and remain profitable over the long run.

I hope Traderji.com will help you in your quest to consistent profits.

DIWALI GREETINGS and BEST WISHES for a PROFITABLE NEW YEAR!