Different Parts Of A Trade And How To Deal With Them – 200818
Everyone wants to trade and believes that it would not be too difficult. After all, it does appear easy- from the surface that is. Then why does success prove elusive? So much so that many people are then willing to swear that there is no money to be made from this endeavour. Only those that have succeeded with it will beg to differ. So, if there are success stories then there has to be way to do it, right? The following is my account of how I have made a success of it through the years.
First up, we need to realise what we are dealing with. What is apparently an execution matter actually has four distinct components that need to be in place for success to even become a possibility. First is the Mechanical part. This involves all the trade enablers to be in place. Like a good broker with strong infrastructure etc. He also needs to be low cost. And offer whatever additional benefits and accommodations wherever possible. Brokers today are willing to go the extra mile to grab and retain business. So search for this first. Next, you need to have convenience of trading. This could mean fast communications- so a trading terminal, fast internet, seamless money transfers, news and event updates, market apps, trading-link bridge thru the mobile etc. etc.
Next is the System part. Market is a dynamic arena and you need to be able to know asap what changes are occurring and where. This is paramount, because, in change lies opportunity. So we need a front end that is capable of conveying to us such change opportunities. Most brokers today have some decent net based front end for information and trading facility. Then we need to have a Scanner that can signal opportunities. Rudimentary scanners are available in trading terminals and on the Net. But more powerful scanners are generally available as some subscription products. At ChartAdvise we have now developed one of the most powerful Market Scanners that I believe you will not see elsewhere. Changes are better spotted as visual elements and hence good charting software is mandatory. Perhaps, it may be a feature of your trading terminal. But if not, then get a separate one. Trading View is probably one of the best available today. Data has to be live and there cannot be a compromise on this. Cheaper data services today are all delayed data. Be aware of this. Cheap is also where the data provider is scamming it from some other source. So make sure of that. A service to a good market commentary is also something that can really cut down time on your efforts to find information and understand it. Traders Central from Chartadvise is a unique service in this regard.
Some of this can be mechanically done (like some outputs of the Scanner) but for more skilled working with all the tools, Education is necessary. Spend time, money and effort in equipping yourself with some good education. This will be money well spent. There are many, many trainers available and you could choose any one of them. Chartadvise also provides quality training programs and you could take a look at that as well. Avoid the ‘training’ available for free in YouTube because it is seldom in depth. At best, it can provide you with some information.
The Mechanical and System portion can provide you with trade entry signals and enable the transaction. Now comes the Trade and Money Management part. This is a portion related to assessing Risk (initial, continued) and Reward (expectations, changes etc.). It is about position sizing and planning exit strategies. While some methods may have the opposite of entry criteria as an exit strategy, it need not be so for all markets and all methods. The time orientation of the trade needs planning because day trades are to be executed and handled quite differently from swing and positional trades in the same stock. Short term investing or Momentum investing would again require some different parameter as well. Also, every stock behaves differently and will behave differently in different market situations as well. When we have several trades open at one time we have to learn to manage them as per their vagaries in the context of the current market situation.
The fourth element is the Psychological part. This is one of the most critical elements in achieving trading success. We may have the best of parts 1 to 3 but if the fourth part- psychology- is not in place then the first 3 work inconsistently. Proper mindset is what one has to achieve to integrate the elements one to three so as to produce a composite whole. Unfortunately, most traders never realise the fact that their mind is their worst enemy and the biggest impediment to success. Just as one has to work to learn to use a software, apply technical and fundamental analysis, read and understand news etc., a similar (if not more) amount of work is required to set our minds in order so that it supports rather than inhibits what we are trying to achieve. Do not take this lightly. It is a lot more important than you realise and I cannot emphasise it enough. At Chartadvise, we spend over half the time in our Mentoring programs on the matter related to trading psychology. Initially attendees are put off by this but come to realise its importance as the course unwinds itself and their experience in engaging the market throws up the vital role that psychology plays.
There is much more to be said about each of these parts but by now you get the idea. Unless ALL the four elements are present in full quantity, success will remain a dream. To the extent that you are able to get together these elements, the consistency of success grows. If it interests you to know all these and more, you can get in touch with the office at Chartadvise. Else, there is plenty of reading material available- both in books as well as on the Net. Spend time there to familiarise you about all of them and how to integrate them into your trading and indeed, into your personality as well.