How to Trade Successfully Mike James from New Zealand
To be a success as a trader, I believe that several things are important.
A sound game plan is vital. It needs to define:
a. A trading method with a positive outcome;
b. A money management strategy, that prevents the drawdown that occurs from taking you out of the game;
c. The psychological makeup to follow your plan faithfully.
I believe that investment success requires internal control more than any other factor. Unfortunately for them, from what I can see, most novice traders stop at point (a).
Sure you need a game plan that gives you an edge, but more importantly you MUST control risk, but in my experience that can amount to naught unless you make sure you don't sabotage yourself (read, not follow your rules).
So presuming you've got a trading method that your happy with, what's the next step.
For a start I'd like to recommend a couple of books that I've found very helpful. If you haven't got them in your library, I'd suggest you get them.
The first book is "Money Management Strategies for Future Traders" by Nauzer Balsara. For me, I found this a lot easier read and more practical than Ralph Vinces' two books.
As well as chapters covering such ground as "Limiting Risk through Diversification" and "Managing Unrealized Profits and Loses". The Appendix (which occupy some 80 pages) not only gives computer code that can be used to calculate risk of ruin but also gives information on the correlation coefficient for 24 different commodities. This can help in portfolio selection to make sure that your open positions are not unbalanced by being, say for example short three different currencies at the same time.
I would also strongly recommend the book the "Disciplined Trader" by Mark Douglas, which offers a lot of useful information on psychology, as well as another book I've just read, "The Inner Game of Trading" by Robert Koppel and Howard Abell.
The "Inner Game" has several interviews with top traders that make the book worthwhile just for that fact alone.
We've all heard the statistics. 95-98% losers. So here we have a business that is a zero sum game where the odds are, that at least 90% of people will loose! I'm sure if most of us were looking to start up a company in an area with a known failure rate of at least 90%, we would not go ahead in the same blithe manner that so many traders seem to.
Don't be fooled. This is a serous business that requires dedication and discipline to succeed. Arm yourself with the best tools you can find and make sure your own personal amour has no weak points.
I read somewhere that those who choose to trade subconsciously choose elements in their trading that not only complement their strengths, but will also confront their blind spots and weaknesses.
Think about that the next time your stress levels rise because you neglected to follow one of your rules.
What your trying to do on a subconscious level, is not necessarily gain financial reward but experiences such things as facing fear, self-worth and increase or decrease of personal power.
We have the choice of confronting our blind spots to heal them and move on, or reject that process and switch trading system or broker, etc.
You need to continually work on yourself. Just as markets change and must be adapted to, life itself for us as human beings is an evolutionary process. Hard, questioning self-analysis will go along way towards confronting our blind spots, to not only improve our trading results each month but also to enrich our personal life as we discover more about ourselves.
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