Let's be honest, trading is not rocket science. In fact, trading succes has little to do with how smart you are. Rather, it's more about your mental process. Successful traders generally do many of the same things, regardless of which market or product they trade. Here are five steps to successful trading:
1) Establish a game plan and follow it. Many traders make the mistake of trading without a game plan. And some who have a game plan fail to execute. You must have a game plan and follow through with it.
2) Only trade when you have EDGE. Just like a hitter waits for his pitch, you have to wait for the right trade -- and make sure you have an edge.
3) Use solid risk management. You must have stops in place and, more importantly, you have to stick to those stops. When the market goes down and you hit that number, you have to say to yourself. 'I put the stop there for a reason, and just because I'm losing money is not a reason to ignore a stop.' Have the stop in place, use solid risk management, take the stop and move on to the next trade.
4) Be Resilient. You have to be able to deal with setbacks. Statistically, you're going to lose money about half the time and make money half the time in trading. In short, you'll have to deal with failure on a regular basis. And when it happens, you have to have a 'so what' attitude. That doesn't mean you don't care, you just have to realize it's not the end of the world. There's always another trade, another opportunity, around the corner.
5) Keep it Simple. The market can only go up, down or sideways at any given time. Many traders try to out think the market, but at the end of the day, you have to keep it a simple game. Keeping it simple will help you improve your trading success.
Doug Hirschhorn is the chief executive officer of Edge Consulting, a firm specializing in “Peak Performance Coaching.” He holds a Ph.D. in Psychology with a specialization in sport psychology, and has offices in New York and South Florida. His client list includes elite athletes as well as many of the largest banks, hedge funds and financial institutions in the world. Doug is presently at work on his new book, 8 Ways to Great (Putnam, 2010).
Have a question for Doug? You can reach him through his Web site,
Disclaimer: Doug Hirschhorn's expertise is in the psychology of achieving peak performance. He is not a financial advisor and does not make trading or investment recommendations or provide trading or investment advice. He is an expert on the mental game. Although Doug Hirschhorn has a Ph.D. in Psychology with a specialization in sport psychology, he is not a licensed psychologist and does not provide therapeutic, clinical or counseling services.