This guest blog post is written by Vlad Gubernat. He is a full-time trader based in Romania who shares his thoughts on his blog, JLTrader.
1. There is no single trading system or philosophy that is right for everyone. There are successful traders out there who mostly use fundamental analysis, while there are others who use only technical analysis or a combination of them both.
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2. You should match your trading method to suit your personality. Having said that, there is no single right way to trade the markets, you have to know who you are before choosing an approach that fits you. For instance, if you don’t like or don’t have the time to watch the markets several times during the day, then a day-trading style is not for you. If you can’t stand the volatility of riding big trends with their inherent retracements, then a long-term trend-following system won’t suit you.
3. Your chosen trading method must have an edge. Otherwise, all the discipline and money management skills in the world will only guarantee that the account will gradually bleed to death. If you don’t know what your edge is, then most probably you don’t have one.
4. It takes time to become a successful trader. Just as it is in any other profession, you need experience acquired in real-time. No one considers himself a successful doctor because he read a couple books and then operated on a dummy, or an accomplished lawyer after watching several episodes of Perry Mason.
5. You need to do your own thinking. Listening to others and acting on tips instead of following your own trading plan is a recipe for disaster. Successful traders follow what the market is actually doing and ignore all the outside noise.
6. “Once in a lifetime” situations repeat themselves in the markets much more often than that. As a recent example, we can take a look at the moves in oil or EUR/USD in 2008 and then again in 2014-2015.
7. Successful trading has nothing to do with forecasting or knowing the future. No one has a crystal ball that works with any consistency. Even if you happen to be right with the majority of your predictions, as some people were for instance in 2008, that doesn’t mean you’ll also manage to make money, as clients of these pundits witnessed in their own accounts.
8. Trading requires a sound business plan that answers essential questions such as: Is the trading account adequately capitalized? What markets will be traded? What type of drawdown will cause trading cessation and reevaluation?
9. Trading is not the place to look for excitement. Although excitement has a lot to do with the image of trading (think Gordon Gekko in the movie “Wall Street”), it has nothing to do with success in trading.
10. Losing is an intrinsic part of trading. No one can win all the time, and with some trading styles such as trend-following, for instance, not even the majority of the time. If you can’t stand taking losses, you will either end up taking large losses or missing great trading opportunities.