Methods I Use to Help Become a Successful Trader - JM
After trading futures for nearly 20 years, it seems to me a discretionary trader that has years of experience trading and that can control his/her emotions can do far better trading than any mechanical system. Granted, very few people have the experience, focus and emotional control to watch a number of markets every day, identify trading opportunities and act without emotion.
Some things that helped me move toward becoming a successful discretionary trader are: concentrating on no more than 4 or 5 markets; looking at monthly, weekly and daily charts each week while being aware of the developing fundamentals and psychology in the markets I'm following.
I write down what price levels and time period I feel offer a trading opportunity and review these each night. This helps with the problem of failing to put on trades due to fear, not paying attention, etc. It helps to keep an open mind and not waste time trying to predict exactly where and how far a market will move. Focus on possible opportunities and keeping losing trades small. Try to take money out of the market constantly. Don't try to make a killing on one move.
Focus on opportunities and when you sense a trend, go with it. Trade to win, don't be a perfectionist. Try to stay somewhat detached from a trade after you put it on. This helps keep emotions in check.
All discretionary traders are unique and must spend the time and effort necessary to develop their unique trading style to make consistent profits.
Risk Management - JB
How much am I going to make? I am asked that repeatedly. I can always tell how much experience a trader has by that question. It is not what you make that is important, but what one does not lose. After I have a profit of so many tics in a day trade, the most important ingredient to my trading takes place, the break-even stop. I have not read any books giving much attention to this concept. What a stressless (for the most part) feeling it is after I am at break-even!
I know you just called the broker with your stop placement order and 45-seconds later you must "cancel and replace" that order, but whose money is it anyway? After a while, the broker will know your trading style, at least mine knows. When I call he has written out my order ahead of time and I just acknowledge the order - it's done. Also, if you can get on a one-on-one basis with an order taker at your brokerage, send them a token of your appreciation, most order takers make very little income. To me, break-even is as good as a profitable trade.
I believe anyone can design a profitable system, as long as one understands market principles, what goes up, must come down faster. Twice as long to go up and half as much time to come down. So what does that have to do with risk management? Think about it. Do we need to use the same amount of risk on buys as we do on sells? I believe that if I am short the market, I need to trail my stops tighter to lock in profit than when I am in a long position. As far as my original stop, all my systems risk the same amount - small. I use to believe that the 3% rule was nonsense with a $10K account. But in the S&P and currencies, I daytrade with less than 2%, I simply cannot get wiped out that way and my profits are at least twice as much the risk in the S&P when trading one contract.
Although, it has taken me a long time to figure out who I am (and sometimes I wonder), trading is easier when you are not your own worse enemy. Concentrate on repeating every process of your steps over and over again, then one can profit.
reprint with permission from Webtrading.com