Since I have been trading I have detected one common factor which distinguishes between the profitable traders from the losing traders.
All though both group of traders scan their lists frequently for prospective stocks to reveal potential profitable trades. However I have noticed that the traders in the profitable group are a lot more specific regards their trading habits, and that they nearly always have their entry and exit points previously wrote out in a specific trading plan before they commence to trade.
Because they have their precise entry and exit points set out in advance, this enables them to trade unemotionally. Once they have entered a trade, either they are correct and then they can follow the trend or if they by chance are wrong, they will then exit with a loss that has already been predetermined. Therefore there is nothing undefined in their trading and they do not experience any nasty surprises.
In direct contrast those traders who are losing money regularly in their trades, this is due entirely to the fact that invariably they do not have a trading plan in place. This group of traders love to jump on tips supplied by others. Usually without doing any prior research, let alone doing any analysis, whether it be technical or fundamental. Therefore they do not have any idea of when to enter the trade let alone having an exit point or having a stop loss in place should things not go to plan.
So because the profitable traders have calculated their entry and exit and stop loss points prior to trading, they can see in advance whether an anticipated rally is about to eventuate or not.
This is accomplished by having pre-determined price points in place the trader can now tell whether a rally has in fact begun and can start to trade more aggressively. Of course if the trade goes against them and hits their preset stop loss, they take their loss unemotionally and are out of the market, thus limiting their losses to a minimum.
There is nothing really complicated about trading. Every entry and exit points can be calculated before hand to enable you to control your risk and to maximise your profits.
If you learn how to do this well you will be a consistent profitable trader.
Chris Strudwick is a successful share trader on the Australian Stock Market Visit his weblogs at both http://www.asxnewbie.com AND http://www.aussie-retiree.com/ for more free articles and useful information about the stock market.