I have been tracking a set-up for the SPDR Gold Trust ETF (GLD), which I analyze as a proxy for the ...
Seven Steps to Becoming a Great Trader
10/25/2010 11:21 am EST
Here are seven essentials needed to become a competent, successful trader. With dedicated effort, these steps can help you to eventually become a great trader:
- Have a vision about your trading. Understand why you
trade. It is never just about the money. Money can be had in any endeavor.
Develop perspective on why trading is so important to you and what
characteristics you want to possess that distinguish you as a trader. Be clear
on these. This is motivating, and helps you to keep committed to your personal
goals when things become difficult. Trading is a tough business with lots of
adversity. If you haven't got a clear sense of what you are all about in your
trading, you will find trading very difficult.
- Make a commitment to your vision and turn it into a daily
mission. Put into daily practice what you need to do to reach your
goals. Put the work in even when other things that are more fun or appealing
tempt you to get off track. Do these every day, day after day, and don't let
up. Keep a journal and track your progress-not just the money, but more
importantly, on your personal progress as you grow and develop into a
competent trader. It's the only way to become good and eventually great at
- Know what you can control and what you can't. You can't
control the market, but you can control how you react to the market. Before
you can become a consistent trader, you must first control how you respond to
the market and your actions. We can always be in control of ourselves and how
we act. Being able to regulate our actions has a lot to do with how we see
ourselves as a trader, our vision for ourselves, and our confidence.
- Focus on the process of trading rather than the outcomes of your
trades. You can control how you select your trades, set risk, and
enter, manage, and exit your trades. You can never control how trades will
turn out. Place your attention on what you can control: The process of
trading, not the outcomes. The process is where you can make a difference.
- Develop the necessary mental skills to trade well.
Technical skills are important, but so are mental skills. Spend time learning
how to stay focused on the present moment. Learn how to "mentally park" losses
and trading errors. Learn how to let winning trades run and cut losing trades
short. These are all crucial mental skills that are not found in reading the
MACD or price bars.
- Practice your trading. A major league baseball player
doesn't just show up at the ballpark and expect to play well; traders
shouldn't expect to just show up at the screen and trade well, either. It
takes serious, dedicated practice to develop excellence.
- Make one trade at a time. Keep your attention on this trade and this trade only. Bring all of your knowledge, skills, and abilities into a single-minded focus on the current trade. Let previous trades and future trades go. They have nothing to do with the trade you are in now.
By Dr. Gary Dayton
These seven steps can put you on the road to successful trading. For more on the mental side of trading, you are invited to the author's Web site, www.TradingPsychologyEdge.com. Here you will find practical tips on trading psychology, market analysis, and lessons on the art of chart reading without indicators.
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