Make Money Trading Online

Archive for February 10th, 2010

Tackling every market situation with proven tactics and decisive actions are the first steps in a trading career. Itís time to take the next move. Below I will list a few of the core principles and strategies that have proven steadfast and central to my trading profession. After you have taken them into your own repertoire of trading techniques, I am positive that you will have similar feelings.

Do you believe that the more you trade the more money you will make? On the surface this rings true, however experienced traders will reveal that the best strategy when looking to make serious money is to understand one market inside and out.

When it comes down to it, the best trading system is simply that, simple. After all, how great can a trading system be if it paralyses your decision making and leaves you second guessing? Too many indicators and over optimization are the number one culprits of an over-complicated trading strategy. There are times when an over optimized plan will perform well; such as in historical data. However, it said system performs poorly in real time than it isnít much of a system, is it?

Do you have your stock trading systems documented and penned? If not, then you will only get so far as a trader. Every single long-term successful trader that I have ever met documents their winning trade systems. Take the time to write the entire methodology that led to your success. Why do you need to bother? In order to trade you must have a perception about the market. Commit to that perception by writing down your thoughts and strategies. By taking that perception and claiming it as yours you risk the opposite outcome of being incorrect. There will be no bones about it since it is written in black and white, and that is the point. Hold yourself accountable, and a revived sense of dedication will arise to better your trading system in similar future market conditions.

One of the most over-looked, yet valuable market strategies is back testing. It may feel like research drudgery, but this is precisely why every trader needs it. Make time to test the trading systems against historical data with similar conditions. Obviously, this is not a crystal ball as exact conditions are impossible to repeat, but there will be striking similarities. After all, as you gain experience trading you form current market perceptions based on past market conditions and systems. Back testing is the same thing, only you didnít lose any of the trades, hopefully.

Back testing is not just valuable for learning the best trading strategies for various market conditions. One of, if not the most important aspect to trading is confidence. Confidence in your trading system is not faked. Oh, traders try, and not just for wicked purposes. Everyone is taught from day one that you must have confidence in order to trade with impunity. However, this is something that is either developed over time, or uses time, as in the past, to grow. Back testing not only gives you insight, but it builds that confidence in either the candle stick, moving averages, volatility breakouts, Fibonacci retracements or any other strategy you employ.

If I told you that not just most, but almost all traders and investors have deplorable trading money management skills, would you believe me? Unfortunately, it is true. Time and time again, it is said that proper money management is the key to becoming a top trader, and yet, so many fail. If appropriate money management is not innate, learn it.

Can I tell you a secret? I call it a ìsecretî since there is so little correct information available about this subject. And this includes authors who have written books about the matter! Some circles call it ìdiversification,î other ìrisk control.î It is commonly known as wisely investing your money.î Whatever you call  trading money management,î know that its power is not in its name, but in its simple algorithm.

Bear with me as I paint a picture for you. Trading and conventional businesses have important similarities worth explaining. To have a successful business statistics must be kept on almost everything. This includes everything from potential customers, sales or conversions down to the average dollar per sale. Before any changes are made to the business they must first know the base line. This perfectly describes trading.

Trading is a business. It may not appear as a traditional brick and mortar, but in order to improve you must keep statistics about your trading system. R multiples, win to loss rations, expectancy and other statistics area must to track. You can guess all day long where to tweak, but until you implement consistent statistic taking your trading will not improve. One solid place to learn about trading statistics is to read Trade your Way to Financial Freedom by Dr. Van Tharp.

At last, you have a back tested, hearty and the best trading systems ready to go. Money management is no longer a worry, as you understand how to properly handle it. You understand the market and are confident in your techniques. You have successfully maximized your trading potential, congratulations! You are about to enjoy hard-earned success that will leave others wondering how you did it.

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