Now that you have completed this guide, it is time to start implementing your trading plan. Choose one or more of the strategies and write down in detail exactly how you will put it into practice. Then try it out, without using any money, but just writing down on paper what you would do. For your charting software, you can either use one of the free websites, take out a trial account with the spread betting provider that you expect to use, or, if you think you may need it for your strategy, subscribe to a service such as ShareScope.
And start asking yourself questions like -:
- When you buy a share do you have a plan when to sell or not ?
- Are you ‘investing’ (longer term) or trading (short term)?
One sound plan is to concentrate on market opportunities where the charts hint that the potential profit far outweighs the possible downside risk (say by a factor of 3:1). In practice this would mean that one winning trade would compensate for three losing spread trades and any better ratio locking an overall gain.
Once you have proved to your satisfaction that your plan will work, then it is time to go live and see how you feel betting real money. Start small and get used to the feel of it. If you have a run of losses, do not think that you have to go big to make it all back. Stick with your plan, treat it as a business, and you will soon be making money from spread betting.
“One point I have noticed is that winning traders tend to have the rules of the strategies they trade written down. At a very minimum the rules for getting in, the rules for getting out at a loss, the rules for getting out at a profit, the rules for bet size, and a general description of the logic and approach of the strategy such that your best friend who doesn’t trade could look at these written rules and roughly understand what you were trying to do.”
No matter what you claim to be your “edge”, you can only have one real edge and that is your ability take larger profits than you do losses and that takes an incredible amount of discipline/mental stability. Any other perceived “edge”, will be quickly whisked away by the market when you start trading it.
Somewhere along the line, I learned how to do that. I believe that this is the question that is at the heart of trading psychology.
Somewhere along the line I learned an approach to trading based upon price action that allows me to be right a bit more often than I am wrong when I bet on the most likely immediate next directional movement of price; and when I am wrong, it allows me to take losses that are much smaller than the profits I take when I am right.
Somewhere along the way, I came to trust my approach, and to accept the fact that any one trade means nothing in the scheme of a great many trades so long as the approach is sound.
Somewhere along the line, I came to trust myself and my ability to execute my approach, which, as I said, I had already come to trust.
So, for me, at least, step 1) Find an approach that you suspect will allow you to anticipate next move price is going to make, 2) Study and practice the approach until you are able to confirm and to become convinced that the approach does deliver what you suspected, thus allowing you to trust the approach, and 3) Continue to practice, practice, practice so that you come to trust that you yourself are able to execute the approach and win more money than you lose over time.
In short hand:
- Pick your method
- Build trust in your method
- Build trust in yourself
How? Practice, practice, practice… To be successful at something practice at it. Clearly certain some innate inherited talent makes certain things easier/quicker but practice makes perfect. Or, start as a nine year old boy (or girl) with a teacher in whom you have implicit trust and so you will have steps 1 and 2 taken care of for you from the get go, and then it is a merely a matter of learning trading as you learn any game or skill and thus quickly develop the confidence in yourself that is necessary to trade well.
I want to support you in discovering what trading style works for you. Short-term traders tend to rely on technical analysis, while medium-term and long-term traders will focus on fundamentals, using technical analysis to identify entry and exit levels on a trade. For myself I prefer to have a life, as I think I’ve mentioned before, and that means that my emphasis is on short term trading which encompasses days to weeks. I like to just use the end of day figures for my selections.
If you want some real time excitement, you are welcome to use my techniques in a shorter time span, trading intraday. On the other hand, you may even want to look at your trades weekly, and that would make you almost an investor more than a trader. Either way, what you learn with my course will give you every opportunity to make money. You know, so many people don’t commit themselves to understanding the markets, it’s not surprising that many people complain that their shares did not make the money they expected.
What’s particularly sad is when people subscribe to an investing newsletter, but don’t realize that they have to trade the second that they get a recommendation if they want to do this – the thousands of other subscribers skew the price, so when they get round to making the investment, the stock has usually gone up already, and promptly goes back down to its real value. The only way around this that is certain is to do your own stock selection.
“Most professional traders’ portfolios use both long and short-term trading strategies, but the longer-term approach is often the one that generates the greatest returns”, according to Simon Brown, head of ProSpreads. “Less seasoned speculators are often seen setting tight stop-loss levels, which leaves little room for error on timing, and even if they get the direction right on most trades, a mistimed entry point combined with a tight stop-loss may well spoil the party” explains Brown.