Do you want to make big bucks trading the markets? We have heard all the stories of how traders can make a quick fortune in the markets. Can it be done? Maybe - do you want a piece of the action?
I started spread betting in the U.K. almost thirteen years ago. As my confidence grew, I moved on to U.K. stocks, U.S. stocks, then the E-minis, and now Forex. It has turned into a love affair where I cannot imagine NOT trading and look forward to the next days’ skirmishes with the markets. For me, trading for a living is the best occupation there is. There is no boss, no overheads to speak of. You work when you want, anywhere you want. It is freedom; just you, the computer and your plan. Plan! What Plan?
Of course, you need a ‘plan.’ Anything in life worth doing must have a plan of sorts. Trading is no different. In fact, trading without a plan is asking for trouble of the most serious kind, financially speaking. You must have a plan. The operative word here is ‘must’.
This is a very modest document. The content has been the subject of many books and has been studied in depth by the very best of traders. It will be studied and debated for years to come. My aim is to plant a seed that hopefully will steer you in the right direction in formulating your trading plan saving you countless dollars, not to mention heartache and ruin. Your plan is a prerequisite before placing any trade.
Before you start to lay your hard-earned money on the line, there are many things that need to be taken into consideration. The first lesson to learn quickly is that the professionals who trade the markets for a living will not think twice about taking that money from you. They know all the tricks in the book, and a few more to boot. The idea is to act and think like those professionals and eventually become one. The profits will then begin to flow.
If you have no idea what you are doing, you just may as well mail a check to those above-mentioned professionals and leave it at that, saving a lot of time.
On the other hand, after losing ‘quite a bit’ in the markets, I copied them and you could do the same by learning their tricks. In short, study, study some more then continue studying. As they say, ‘knowledge is a powerful thing.’ You will eventually come to the point where you actually know what you are doing!
Everything will then begin to fall into place.
Where do I start?
Trading is very easy. Making a consistent profit is not – unless you have the plan we talked about earlier – a master plan. You need to learn, and sustain, some good habits. The primary weapon in your arsenal in fighting your opponents is getting the odds in your favor. Gaining an EDGE – just like the casinos. Take a look at the house edge in the casino and notice how small it is. Something like 2.5% is all – but this is enough to make them a fortune over time! It is just the same with trading the Forex markets – get yourself an ‘edge’.
Let’s stay with the casino example for a moment. They often have losing days when a punter will win big, but at the final reckoning; those boys will be in the money. That is because of the ‘edge.’ Your edge starts here. It is not one item to concentrate on but your whole approach to trading. Sound complicated? Not really, when you break it down into its component parts. There really is no point in doing this exercise if you only pay lip service to it. You must follow your rules because they will get you into the money, no argument.
Rules
There is no point in having trading rules if you don’t follow them, which very nicely brings us to our only golden rule: YOU MUST FOLLOW YOUR DEFINED RULES RIGIDLY.
This rule may sound silly but think about it, what is the point of having rules if you don’t follow them? How often do you break minor rules in some other pursuit such as driving, sport or work? Sometimes it can be costly. In Forex trading, it can be very expensive indeed, account-wise. My Forex rules are split into three sections, you may wish to do the same:
- General rules – similar to laws, these govern your whole outlook on trading
- Trading rules – similar to regulations, these are aimed at you as a trader
- System rules – rules when actually trading your system
Remember, this is a very short article on the ways that I have tackled the problem of gaining an edge in my trading, and in trying to emulate the professionals. This is by no means the only way, so you will need to address your trading traits in a similar manner to extract those profits from the market that we all aspire to. Let’s look at the general rules.
The reason you are reading this is because you want to make money. I have been in your shoes doing exactly the same thing, but at the wrong end of an £8,000 ($11,937.56 USD) account. Yes, it was all gone! It was not the first account that I had delivered to ‘the professionals’ so something had to be done. I made rules and divided them into sections, analyzing them further. Here are my general rules that you may want to consider:
a) General Rules
- Work/study hard continuously, knowledge is essential, but
- Strike a balance, have a life. Trading at all times will make you stale
- Take responsibility for every decision that affects your trading
- Self-belief in your aim, in what you are trying to achieve
- Do you want to trade full-time or part-time, how many hours per day?
- What is your aim, what do you want to get out of it, know yourself?
- The only place where success comes before work is in the dictionary
- Treat trading as a business and organize it as such
This is an excerpt from Aug 2011 issue of Forex Journal.
