Do you tend to become a competent and completely independent trader? Do you want to trade on the exchange and understand what you are doing? Are you one of those impatient and lazy people who believe that everything happens with a wave of a magic wand? Do you think that everything you need is to read a couple of books on trading, register an account, install a platform and the inflow of money is guaranteed? Billboards brightly advertize simplicity of trading and unlimited opportunities to make money. However, things are a bit different in reality. In fact, trading is not a simple business and envisages availability of a rare combination of human qualities.
If you really want to learn how to become a successful exchange trader and are ready to accept all challenges of the market, then this article is for you…
In this article:
- Excessive information.
- Trading is art, analytical research and psychological fight.
- Use efficient analytical instruments.
- Take into account market conditions.
Learning exchange trading will seem very simple to you, but only in the beginning. A possibility to make money sitting on a sofa at home or in a room of a five-star hotel somewhere on the downwind Bora Bora island attracts many people. Consequently, these many people immediately rush into the depths of excessive information, restlessly prowling the Internet vastness searching for the Grail. However, usually, nobody goes deep enough into the study of some specific method of trading and convulsive searchers continue until the enthusiasm completely evaporates. As a result, the whole time spent on the search for a magic wand goes into the drain in a company with the money spent on opening the first real accounts. If you use this approach, you will be completely disappointed and will feel absolute confidence in fundamental impossibility to make money on the exchange. It is practically impossible for a beginner to digest the excessive information which you find on the Internet. Billions of web-sites, books, opinions, strategies and so on. What is correct and what is not? The trading style of any professional trader is determined by his or her lifestyle and psychological features of the personality. That is why there is such a multitude of opinions with respect to correctness of one or another approach to trading. Sometimes, you even come across contradictions!
The reality is such that the majority of beginner traders (sometimes by far not beginners) make the same knockdown mistakes.
Let’s list them:
- Absence of confidence.
- Insufficient understanding.
- Acceptance of bad advice from other confused traders.
- Absence of wish to improve yourself.
Do not try to digest the whole volume of information provided by various Internet resources and other sources of information. This way you can easily overload your consciousness, get lost and, finally, become disappointed. Find the strategy which fits you personally and your lifestyle and focus your attention exclusively on this strategy.
Profitable trading is reduced to three elements that resonate in harmony. If you exclude at least one of them, your trading career will be crashed. So, here are these well-known basic elements:
- Trading strategy.
- Money management model.
- Trading psychology.
This is the tripod on which trading is based. Many traders start to trade without having the slightest idea about at least one of these fundamental principles. If you are a beginner, you should form a serious attitude to trading at the initial stage, otherwise you will waste a lot of time and money.
But even if you failed in the market – do not give up! Trading is not for weaklings. Only self-rigorous and exceptional personalities with a strong character and a will to win survive in the market.
Mastery of the exchange trading will be a severe test of your character, that is why prepare for trading thoroughly.
The working cycle of many professional traders includes three important stages. At the first stage, the pros conduct a fundamental market analysis, identify regularities and develop own trading system on their basis (this is probably the most time-consuming stage). The second stage is a forward testing of the trading system on the demo account. At the third stage, they start trading on the real account. It is very important to describe the trading rules in the trading plan in all details. Such an approach would allow you to feel confident that your trading method will not let you down and will increase stress resistance and decrease the impact of psychological factors when working on the real account.
At the same time, the work on the demo account will never teach you what the real trading can teach you. You will have no psychological challenges when you trade on the demo account since you face no risk. Psychological skills will be developed only if you trade on real account and there is no other way. You should feel the risk and develop the right attitude to losses. This is the only way to achieve the result. The ability to cope with positive and negative emotions working in the market is 80% of success. However, we should warn you – do not rely on your psychological command and ability to keep yourself under control if you do not have your own working and tested trading method!
Psychology is the most important aspect of trading (read our Trading psychology: 14 emotional state article to learn the trader’s psychology during trading better). We are the worst enemies to ourselves during trading. The market doesn’t accept making emotional decisions. Thoroughly develop and test your trading method before you start real trading.
Trading is an over-competitive environment in which only the most flexible traders, who have modern analytical instruments, survive. The financial market depends on a large number of variables. You will not be able to correctly interpret the market information and find regularities in its flow without special analytical instruments.
The structured data flow from the exchange gives a possibility to assess and analyze the reasons of market fluctuations. The trading and analytical ATAS platform is one of the technological developments, which provide a trader with a whole set of modern instruments for comfortable trading and conducting the efficient market analysis. Visually comfortable presentation of the exchange data provides a simple and clear interface. It allows traders to quickly interpret the market activity and actively make trading decisions.
The flow of market data, which shows how many market participants want to buy and how many want to sell and at what price at the current moment; where and when a trade was executed; it was a market buy or sell; how big this trade was and how it influenced the price; etc. All this is a valuable information which increases the market transparency and provides an understanding of the current activity. You will definitely increase your trading efficiency if you learn to see, understand and apply this information in trading.
Use the modern trading and analytical software, which provides a clear presentation of the market information. Highly informative presentation of the market data results in a clearer understanding of the market tendencies and, as a consequence, in higher trading outcomes.
The study of the exchange data brings us to the understanding that trading signals are not the most important indicators. The system may generate a lot of signals for buying and selling but it doesn’t mean that any of these signals is a good possibility for opening a position. If you use every pattern or setup, which you notice, you, most probably, will be losing money.
The most important thing in the exchange trading is the ability to identify market conditions and market situation. This ability will provide you with a serious competitive advantage. And it makes no difference what trading system you have even if it is the most advanced one. It will not work anyway, if you are not able to flexibly apply it in the ever-changing market.
Success of the majority of trading strategies depends on the predictability of the price movement – sawlike up-down price fluctuations and flats in a narrow range will ‘kill’ efficiency of any system.
That is why the majority of traders agree that a trend in the market is a friend. It is easier to forecast price movements in times of stable tendencies without sharp fluctuations.
Even the best professional skills will not rescue the best trader in the world if he would try to trade on the hostile volatility. The ship captain tries to wait out the storm before continuing to sail. That is why he orders to lower the sails. The same is true for the market. It is better to wait out the ‘bad weather’ and continue trading when the conditions are favourable.
The idea of successful trading is not reduced to the thoughtless pressing of the ‘buy’ and ‘sell’ buttons. You need to conduct the market analysis and identify a proper phase for trading. Many successful traders consider a trend to be their friend (there is a saying – trend is your friend), because it represents those market conditions, under which it is easier to forecast price movements with a high degree of probability.