If you have ever been overwhelmed and confused by the vast amount of free investing and trading information available online, here is your solution.
While finding information yourself can be very useful, be careful as information overload can take away from your ability to think in a clear manner, as well as discourage you from thinking you are ready. In fact, the overload of information might make you feel that you will never be ready, because there will always be something new to learn.
I was actually caught up in this trap for a time. I spent an entire 18 months hoping to learn everything there was to know before beginning, and of course, this was impossible. However, after 6 months, I managed to persuade myself to open a very small account, with the knowledge that I would make mistakes.
As a result, I altered my mindset from the hope of making a living from trading to simply being happy with being the best trade executor I could possibly be. I accomplished the latter goal through being highly disciplined in my use of a trading plan and checklists.
Occasionally, I believed that I did not need to follow my checklists, as I was intrinsically “in tune” with the movements and mood of the markets. I’m pretty sure you can guess what happened as a result of this!
Well, to start with, I lost my $20,000 initial account, and I mortgaged my house to obtain an additional $80,000, which I lost as well.
Not making a cent over two years, and having to pay the market a tuition fee of $100,000 loss was very disappointing. Additionally, it almost led to my quitting the market all together. I began doubt myself.
Here are some tips for avoiding the challenges I experienced:
1. Before learning how to trade, learn how to invest.
I know that this will upset some people. However, I continue to assert that this will help you ultimately achieve success.
You may be wondering how investing is related to trading, especially when trading doesn’t involve the long term ownership of the stock I am purchasing.
It is likely that pure technical analysts who depend completely on price patterns and charts will disagree with me. The reason I know this is because I used to be one of these individuals.
Let’s consider, how many traders in the world have achieved a place on the Fortune 100 list?
The traders who have made it to the list are primarily longer term investors. Investing and trading are very similar, just on a different time scale. So learn how to invest well before trading.
This simple change in mindset will improve your results.
I also will not purchase a stock on the basis of only charts and price patterns alone. I must make sure that it is a solid and strong company that shows absolutely no risk of ending up in bankruptcy.
In the end, every trade is an investment. The only real difference is that trading is based in a shorter time frame.
2. Create a trading plan
Have you ever heard the expression, “if you fail to plan, you plan to fail”? It is an expression that is very applicable to trading. Fundamentally, trading is a business venture. Trading is certainly not a hobby and you should never view it as one.
It can be immensely helpful to simply write down a set trading rules that you can stick to. Following a set framework will help you more readily find opportunities, and reduce the number of mistakes and stress from trading.
3. Visualization
Everyone is capable of visualization. You definitely can do it, even if you believe you cannot.
To apply visualization to your trading, make sure that before you trade, take a few minutes by closing your eyes and seeing yourself following your trading plan and carrying out the trades you have planned for the day.
It took me months of practice to perfect the use of these techniques. I found that changing my mindset was quite easy, but developing a trading plan I would stick to was much harder. This was due to my tendency towards creating a ‘perfect’ trading plan with every single detail. This made the plan too difficult to actually follow in practice. As a result, I eventually reduced my plan to two pages which I now follow.
Visualization took me the longest amount of time to master, and I actually still don’t do it all the time. But when I do, visualization makes my trading much more effortless as I have already anticipated and played out all the steps of the process in my mind.
I hope these three simple but crucial steps can help you as much as it has helped me, dramatically increase your chances of success in trading.
To find out how you can safely double your returns in 10 simple steps, click here.
