Do You Have the Discipline of a Trader?
The rules of stock trading are simple, but because of our personality quirks, everyone still tends to behave differently. The average person’s psychological behavior does not match the behavior of the market. Greed, on one hand, and fear on the other cause us to react in precisely the opposite manner than is required.
When starting your journey as a successful day trader, you always need to maintain self-discipline – this perhaps the most important rule you’ll need to follow. If you can do this, you’ll be off to a good start. However, if you want to truly succeed as a trader, you’ll need to do much more than the minimum. If you truly want to achieve a long-term career as a trader, it can help you tremendously to heed the following eight tips for a profitable start:
- Don’t Read too Much Instructional Material - This may be counterintuitive, but you can actually read too much prior to beginning your trading career. Information-overload will take you out of focus and confuse you. After some months of trading, once you’ve gained experience and internalized the basic principles, then you can read more, more fully comprehend the material and utilize the information effectively.
- Find a Mentor you Can Trust – An experienced personal mentor who can walk you through your initial steps, or a course from a credible trader can go a long way toward helping you thrive as a trader. Self-study is not a sufficient solution. Just as driving can't be learned only by reading a textbook, so it is with trading.
- Use a Demo System - Before trading with real money, ask your broker for a demo system that allows you to practice. Just as important, be diligent about using the demo for no more than a few days. Using the system for longer periods of time might create the dangerous illusion that you're immune to the kind of psychological effects that result from the pressures of trading in real money. Believe me…you're far from immune!
- Only Work with Sums that Suit your Abilities - Open an account with a broker and deposit a sum suited to your financial abilities. You should absolutely not deposit a sum of money that will endanger your financial status. A too-large amount will cause you tremendous psychological pressure and lead you to break discipline, with dreadful results.
- Don’t Trade Alone - You may feel confident, but you're still far from ready! Make sure you have ongoing, real time follow-up. Join an online trading room and listen to what experienced traders have to say. Then try to emulate their actions.
- Trade in Small Quantities - You're not safe from errors. Your initial goal is to successfully conquer the market while trading in small quantities and creating minimal profits or losses, all for the sake of your learning curve and not for getting rich quick. Only when you have greater control and stable profitability should you increase the amount.
- Keep a Trading Diary - A trading diary in which you list every action you take, with notes and conclusions (to be discussed further) can be an excellent reference on your trading journey. When we don’t write the details down, we forget them.
- Reread my Book, The Market Whisperer - Read The Market Whisperer a second time once you have some experience. Only in the second reading, once you've traded with real money, will you understand the significance of the assistance this book offers - then read the book a third time one year later!
To learn more about the stock market and to begin your own journey toward financial independence, visit Meir Barak's site Tradenet and check out his book "The Market Whisperer."
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer