There are many parts to successful trading. Being a profitable trader is not just a matter of selecting a level to buy or sell and hope you make a some money (as many seem to try!)
It is also important to create a trading plan which consists of financial controls and devise a trading style and parameters which the market must meet before entering a trade, when to exit and where to place a stop loss.
In my last article I looked at some of the common mind games that can trip you up when trading. This time I want to look at what I call the 5 C`s of successful trading.
Concentration – the ability to maintain focus during the whole session without being tempted by distractions such as the internet or mobile…unless trading related! It is important to take breaks from the screen each hour and this is your opportunity to catch up!
Confidence – the belief in one’s ability. It is essential to have confidence in trading, otherwise it makes it difficult to press the button to get your trade on. A lack of confidence usually stems from a sequence of poor results. Overconfidence is possibly the more dangerous of the two as after a string of good results you feel invincible, which is generally when you have one of your worst days as the market reminds you to stay humble!
Control – the ability to maintain emotional control regardless. It is important never to panic in trading, otherwise you have already lost! Controlling your emotions in trading usually takes years to develop and it’s doubtful if many ever manage full control. Not only the fear, ego, greed and hope but also revenge! Losing in a trade and instantly looking to get the loss back. This usually leads to a string of losses as the trader is not thinking clearly and not waiting for high probability opportunities.
Commitment – the ability to continue working towards goals. Trading takes 101% commitment, otherwise it is generally a waste of time and money. It requires discipline not just with stop losses but also discipline in creating a trading plan and then keeping to it.
Consistency – to regularly end the day with a profit. We all take losses during trading; the important thing is to control those losses and let our winners reach their full potential. Losses are just a business cost and its important not to take them personally and just accept them as part or trading. Once you are able to accept losses, it makes trading easier! Profits are important as we need the good days to more than cover the bad ones. With a solid risk-reward, two or three of your good days should cover all your bad ones each month. There are many ways to protect your profits in a trade and also to protect your daily profit to prevent giving it back to the market. Consistency drastically reduces the emotions in trading as you do not experience the roller-coaster many do!
Armchair Trader readers can currently enjoy a discount on Chris Tubby’s trading courses using the discount code ARMCHAIR5% when booking. More details on Chris’ courses can be found at www.masterc.co.uk