It takes patience, a good sense of timing, and financial resources to become a successful stock trader. If you have enough money to open a brokerage account, you can see what the market brings you. Trading is similar to gambling in that the action moves quickly and you can make or lose money fast. Trading discipline and prior experience can help prevent investing in the market from being too difficult or painful. In the current markets, longevity means success, so here are a few recommendations on how to keep trading for the long haul.
There is a required commitment of time and dedication required to be a successful stock trader due in large part to the thousands of market professionals that generate fierce competition. However, amateurs can be successful and that success tends to be derived from the establishment of formal trading rules and the adherence to them. Further, these amateurs are prepared to absorb any losses, even when those rules were carefully followed.
Trading discipline can dissolve instantly when a trader experiences the taste of losses when the expectation of the trade was great profits. This tends to lead to irrational behavior and the losses grow as the trader gives in to blind hope and greed while chasing losses with losses. One of the most successful and influential investors of the 20th century emphasized that success in trading requires avoiding these vices and their pitfalls.
Timing itself may be the primarily determinate in whether a trade results in a profit or a loss, particularly in the daytrading arena. Because such trades tend to be an attempt at fast money, a great deal of patience is required when the trade turns to the negative. Although no trade wants a specific trade to become a long term investment, it is vital to avoid over trading. The best way to avoid costly errors is to stick to your own devised set of trading rules.
Experience is very important in timing a stock which is a skill just like timing the markets and only with experience gained over a period of years, one learns to read signals, spot the trend and time the trade. Timing and patience is very important and with both these attributes, one can earn a substantial sum.
Finally a successful stock trader needs enough capital to be independent - essentially self-employed. Among the logistical concerns, the issue of funding is perhaps the greatest because it sets the tone and possibly even the outcome of the trading venture. At a minimum one must have enough capital to absorb trading losses. But personal and family considerations often take an unforeseen toll. Bills and mortgage payments must never become dependent on the outcome of a trade. For the person who dreams of trading for a living, the means tens of thousands and, more likely, hundreds of thousands, in "startup" costs.
A successful stock trader takes dedication, formulation of rules, stick to them, and prepare loss. It is difficult when things appear not to work and losses are mounting. Decisions become irrational. Fear, hope, and greed are best avoided by trader. Day trading is timing profit and loss. Trading discipline takes patience and following the formula when a trade turns to a loss to avoid "overtrading". Experience teaches timing and patience, important when timing the market, reading signals, and spotting trends. The amount treaded determines dividends. Can you absorb the losses? When you start trading the largest offset is how much you will invest could make you a Market Wizard.
- Mark Crisp
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