The Power Of Healthy Trading Habits
“The right trading behaviors start as rules and evolve into habits.” – Brett Steenbarger
Successful trading is all about respecting key rules to minimize stress. Healthy trading habits gives excellent results. Doing the right thing at the right moment is the key. In trading, you should learn what you need to do in order to be successful. You should start by educating yourself, trading systems, trading methods, trading plans, risk/reward ratios and win rates are new thing for the beginners. That’s exactly why they should do their own researches, find good sources of trading information, get around experienced traders and read great trading material in order for them to develop trading habits. Discipline is one important thing in trading, you should develop trading rules. If you have the right rules they will gradually become part of your trading personality, and when it becomes hard for you to break those rules that’s when you know that you have reached trading maturity.
• There are two ways leading you to profitable trading, efficiency of winning trades and size of winning trade. A trading system must have more wins than losses. The high win rate systems can become futile when losses are allowed to get out of hand. High win rate systems no longer work when a market environment changes from range bound to trending. Lower winning percentage systems are used by long term trend followers, breakout traders and option buyers. In order to benefit in a low win rate system, doesn’t mean that you have to be right every time, you just need to be right big and wrong small. You can be profitable with fewer wins as long as losses are kept small.
• Trading based on feelings is something new traders do, as for professionals they base their trades on facts. You should trade so when you’re wrong the losses are small. A trade should be done based on price action, a technical indicator, a trend line or price pattern. Traders have to stay consistent to identify chart patterns and read price action, in order for them to not start seeing what they want to see. It is better to trade when having a reason than trading off an instinct, because having a reason gives you a great chance to be on the right side of the trend.
• While new traders are baited to take the wrong side of trades at the open, the smart money waits for the market to be closed before making any decision. A good way to learn how to trade is to study, test, trade and master a specific thing. Being able to study how your specific market moved around key technical indicators in the past helps you have the necessary insight. Traders should understand that trends do not go straight up or straight down, they tend to zigzag back and forth. The two most profitable ways to trade are to buy extreme lows that are caused by unfounded fears or to buy breakouts at the beginning of a large trend. The best trades are those that you understand and accept the risk/return potential. Hope is a great tool for personal goals but a risky and terrible guide when making trading decisions.
• A trader should trade with a position size that he/she can handle mentally and emotionally. The moment you start having problem on following your trading plan you have entered a danger zone. Another important thing to know is that trading decisions should be made based on price and not the need to make money. Profit targets have to be set at technical levels of price resistance, not on your own profit target. Bad trades happen when a trader is impatient and wants to make money as quickly as possible they should allow themselves to be bored and wait for the right moment. A trader can only be successful after they have faith in themselves as a trader, their trading system as a winner, and know that they will remain disciplined. Your success as a trader will be based on the ability to have a low winning percentage with big wins and small losses or high winning percentage with small wins and small losses.