Trading is easy if you follow some simple steps. But firstly, let’s quickly identify some potential impediments to trading success so that before you move ahead into this venture you clearly understand what the prerequisite essentials are.

Those that achieve success in this game do so for the love of trading and the challenge it offers both on a personal and trading level. Inevitably those that do it for the right reasons see profits flow naturally. It is an occupation that is enjoyable, fun, satisfying, it creates independence and offers great freedom.

With the low barriers to entry to an occupation that seems simple enough investors soon learn ‘putting your money on the table’ requires an entirely different mindset. It attracts a myriad of emotions and divergent psychological forces that all need to be addressed.

In reality trading is 90% psychological and 10% building a trading system.

The fact is anyone can build a trading plan that on paper that offers great potential, and we see many of these on various websites, but making it work is the real challenge. Ten people can use the same system, but only one will make it work. That’s the odds of success, one in ten. And here’s the really enticing part, that one person who makes it work will make what the other nine lose. Now that’s an attraction and a good reason to address the issues that will help you get it right. Look inside, look hard and be careful about discarding what you see.

Your trading balance will soon tell you the truth.

What are your strengths and weaknesses? Why aren’t you winning? For example, fear is a big weakness. When you are facing a loss does panic and doubt set in? Yes, often so this and various other emotions cause feelings of stress and fear that need to be managed so that you can train yourself to become poised and behave the same way whether winning or losing. You need to be in a space personally that allows this to happen and you can then trade successfully.

Too often trading is seen a solution to a problem and if that is the case
it will invariably only magnify the problem.

When you are personally content you will make the right decisions. Confidence in your plan is a big part of succeeding and to do that you have to be inwardly aware. A method has to be tested and challenged to build that confidence that enables you to execute correctly. If not, trading will seek out your weaknesses and exploit them.

Life balance and harmony are key before you are ready to embark on a trading enterprise and this is no small issue. Trading should not be stressful, but rather an enjoyment. Remember, the 1 in 10 example is a fact. Don’t stress and pour over charts, that is a big mistake, don’t doubt the system, accept losses easily and move on. Have the ability to put emotions to one side and be confident in yourself.

Let’s now do a short checklist to start.

1. Making money is not an objective, that’s vague and unhelpful. Setting a tangible target for success is an objective. A 40% return objective might be a good one. See Stockradar results on the home page of what can be achieved with a simple method. These results are compound with no withdrawals, but the testing process and simplicity are really things to observe. Remember before you can benefit from such a portfolio you must be able to execute effectively.
2. Do you have a system by which your trading decisions are made? If not get one. Simple is good. It might be trading a trend breakout or buying a new high. The Stockradar portfolios are a combination of both. The trading system is the tool that controls your trading. It will include time frames, size of trades, stocks you cover and anything that requires a decision to be made. A good system predefines all your actions. When the market throws something at you, you will know what exactly to do. This is the de-stressing element. It makes it comfortable and easy.
3. It is a part of the above, but I separate it out because it is a big one and needs to be managed appropriately or you can be out of the game very quickly. It is an important extension from the initial concept of confidence and harmony discussed at the beginning of this article. Taking losses should be an easy process because you have confidence in the system that not only it will continue to return good results but also the losses are part of that process. Your system will work on probabilities not absolutes.

Trading will seek out your weaknesses and exploit them.

By now you might now be getting the picture if you want to trade successfully the hard works comes now and the results flow later.

In the Stockradar blog you can search for many topics that you may find relevant to your questions and articles that will help you understand your role in becoming a successful trader. Identify other things you need to work on such as working with probabilities, managing risk, understanding biases, gaining perspective or the understanding what the fundamental truths of trading are. My favourite one is that you don’t have to know what’s going to happen next to make money.  It’s true we respond to market action; we don’t predict it.

My recent article on Exploding myths and Fallacy of Diversification helps us understand why diversification has become such an accepted misnomer when trading. High conviction generates far superior results by having confidence in your system. Hold the stocks that are ‘working’, not the ones that aren’t. Diversification tells me investors either don’t know or they don’t have a plan.

Here are three simple elements to focus on.

1. Understand clearly your strengths and more importantly your weaknesses.
2. Keep things simple.
3. Have a method.

Trading is easy, it is only ourselves that make it hard.