Before you consider any type of trading, you should set out any goals you’re wanting to achieve. With goals in mind, you can then plan how you intend to achieve them. Without them, you leave yourself at risk of going off on a side track.
There are risks with each trading style and they will each require a different approach to trade successfully. So, you think you’re ready? Reckon you’ve got what it takes to be a top trader? We break down the anatomy of a trader, from knowing when you need to read the best trading books to when you might need to rethink your plan.
Brain: Patience is a virtue
Trading isn’t a ‘get rich quick’ scheme. Patience is a much-needed quality when it comes to trading – it could even hold the key to success. In a time when everything can be accessed instantly, society has now reached a point of understanding if they want something now, they can get it. But with trading, this isn’t the case.
In trading, this type of immediate gratification can be the enemy of success. Just like if you were to learn a new skill or sport, training and practice are needed. It’s very rare to succeed and excel at something immediately. Patience and persistence will serve you well.
Eyes: Look into your discipline
There are two types of discipline when it comes to trading: discipline to stay focused and hardworking, and discipline to stick to your trading plan. The first, and arguably most important, discipline a trader can have is the ability to focus on studying and understanding how to trade. While some may consider it a tedious task, everyone serious about trading should go through extensive studying and testing out every idea before initiating any trades with real money. Learn from the success AND mistakes of others.
The second discipline, sticking to your trading plan, is also key. Your trading plan is a logical method for recognising securities which take into consideration several variables including objectives, time and risks.
Stomach: Trust your gut
That gut feeling. You know the one; sometimes you choose to listen to what it’s saying, other times, you may opt to ignore it. Some may refer to it as your instinct. It’s that immediate feeling or reaction, there’s no logical explanation behind the feeling – you just know. You can slowly learn how to develop your intuition and trust your gut feeling.
Your intuition exists for two reasons: to protect you and make you succeed. There may be times when your trading, and you think ‘I just know I should exit a trade’ – it’s up to you to decide whether you listen or not. Remember Ronald Wayne, the third co-founder of Apple? He sold his 10% share in the company for $800. He would be one of the richest people in the world today had he remained in. What did his gut tell him to do?
Feet: Know when to walk away
Probably the hardest part of trading is coming to terms with losses and being okay with walking away. Losses are expected. Once you have accepted that you will have losses and go through losing streaks, you can determine how to much you can cope with. Try to imagine how you would feel with the loss of a certain amount and if you could handle it. Set a floor you won’t go under so that you have an agreed level of risk and don’t go below this.