By Sam Seiden, Online Trading Academy Instructor
Want to know if you will be a successful trader or not? I have the crystal ball and can tell you and will share that in a bit. Moves in markets are a result of mass psychology. We make money in the markets by being masters of human psychology and supply and demand. Winning and losing in the markets is more defined by your mental make-up than your trading style. What is more important than chart reading is to first understand what you think. Instead of focusing on changing your actions if you're having trouble with trading, it's time to notice where those actions come from. Actions stem from behavioral patterns, and behavioral patterns stem from beliefs. So, it's at the level of beliefs that decisions are made, and moreover, where your ability to differentiate reality from illusion lie. It's time to start considering where your beliefs about what works and what doesn't in trading come from. In life, which includes trading and investing, most of us tend to repeat the same processes over and over expecting a different result. Over my many years in the business of trading, there are some very clear differences between the consistently profitable trader and the consistently losing trader. To know in advance before you start trading whether you will be a consistently profitable trader or a consistently losing trader, I ask you again, who are you?
The Novice Trader
Do you tend to follow the crowd?
Watch what others are doing
Comfort in numbers
Do you avoid taking risk unless others are sharing the risk as well?
Do you feel that if others are buying then it is "ok" for you to buy as well?
Do you act on the advice of so-called "experts," i.e., the advice of market gurus, CNBC, analysts, and your brokers?
Do you tend to complicate the trading process and ignore the important simplicity of markets? Do you tend to complicate other things in your life?
Do you make the same two mistakes consistently losing traders make, buying and selling after a move in price is well underway (late and high risk) and do you buy into resistance and sell into support (low probability)?
If you answered YES to any of the questions above, my crystal ball says you are going to fail when it comes to speculating in markets.
The Consistently Profitable Trader
Do you lead the herd?
Do you tune out all the subjective noise that can get in the way of making proper trading decisions? Do you NOT care what others are doing and make decisions based on a very mechanical and unemotional set of criteria based solely on the laws and principles of supply and demand?
Do you know how to identify the proper entry that most people never see?
Do you buy after a period of selling and into price support? Do you buy fear?
Do you sell after a period of buying and into price resistance? Do you sell greed?
Successful traders:
Can identify opportunity before others
****ute trading plans mechanically
If you answered YES to these questions above, my crystal ball says you will do fine.
Successful Trading
Having the ability to find two sets of ill-informed individuals in the markets in any time frame.
Those willing to sell their stock, futures, Forex, or options to you at a price you know is too cheap. You know by objectively assessing supply and demand.
Those willing to buy your stock, futures, Forex, or options at a price that you know is too expensive. You know by objectively assessing supply and demand.
Having the tools, knowledge, and ability to take the proper action when these two groups appear.
Play the bandwagon correctly…
Proper trading is knowing how other market participants think and react when they are correct and, more importantly, when they are wrong. Price patterns are thought patterns.
Mental Musts…
Confidence
Discipline
Patience
How to get these…
Reduce and eliminate subjective analysis.
Learn to fight the urge to do what others are doing and make decisions based on a very mechanical and unemotional set of rules and criteria.
The Proper Entry
Know Where To Enter, Support and Resistance
Smart money enters here.
Entry Must Be Low Risk
Most important part of the trade.
Enter Before Others
This is how we get paid.
One of the most important things to understand about proper trading and investing is that visible confirmation and opportunity are completely inversely related in trading. I don't have a crystal ball. Life would be easier if I did, but it certainly would not be as fun and there is nothing more fun than a good challenge. What I have is experience and the ability to pay attention to what works and what doesn't.
Those who can see clearly without the influence of illusion and weakness of mind will clearly see opportunities others never find.
So I ask one more time… Who are you?
Have a good day.
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Who Are You?
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