Technical Tips / Editor / 18 July 2008 / 1 Comments

Increase your chances of success

1. Being in control

Winners are always in control of their trading. They plan their trades and execute the trade according to the plan. Losers act irrationally and impulsively on feelings of greed and fear. Losing control of your trading strategy leads to losing your money.

2. Taking responsibility for results

Winners take responsibility for their own trading results (profits and losses). After suffering a loss a winner would try to evaluate whether his initial reasoning for the trade was correct, whether something fundamental changed along the way etc and try to learn from it. A loser would blame the market, a tip he got, advice from a colleague, boss, wife or kids.

3. Be aware of general market conditions

Winners are aware of general market conditions and adjust their trading strategies accordingly. What has happened to the FTSE 100 in the last year? What has happened to the oil price recently? Which markets are in an uptrend and which are in a downtrend? Winners are aware, losers aren't.

4. Develop your edge

Winners have an edge that losers don't. This edge can be achieved in different ways e.g. research, technical analysis, system that defines trading rules for entry and exit of a trade. Losers have no edge and often no system (or a losing system that they use anyway).

5. Use methods that suit you

Winners use a system that suits their needs. This can refer to your resources, timeframe, attitude toward risk or personal views. Losers use systems that don't suit them and it ends up costing them money.

6. Balance your risk and reward

Some trades have a high probability of success but a low reward if successful. Others have a low probability of success but a massive payoff if successful. Understanding the relationship between the specific risk and reward of your trade is crucial. Losers don't and will often go for trades with high risk and low reward (the worst trade of all).

7. Manage your money (bet size)

Winners have an appropriate strategy for determining bet size. This could be based on the value of your trading account. Losers tend to change their bet size regularly and often bet too much when they are trying to recoup losses or getting greedy.

8. Plan your exit strategy

Exit strategies are just as important as entry strategies. You should always have an initial stop loss and a profit target for every trade. These can be revised later on. Losers will often enter a trade with no stop loss or profit target which means they have no plan

9. Draw up written plans

Winners have written plans regarding budgets, targets, trading rules, plans, shortlists and contingency plans. Think of this as a business and these written rules are your business plan. Losers don't have written plans and fail as traders (like a business without a budget, target, business plan or contingency plan inevitably will)

10. Monitor your performance

As with any business it is very important to constantly monitor your performance. This includes general record keeping of profits and losses as well as reviews of the mistakes that were made. Some traders make the same mistakes repeatedly because they never objectively report and monitor their performance.

Good luck!

The Tradefair Spreads Team