Sunday, October 14, 2012

How do you measure a successful trader?

As a trader, I have found two key rules that have led to my success over the long term:

1. Consistency
2. Discipline

Let me explain.

1. Consistency - In order for you to be a consistent trader, you need to limit your risk. Great traders never risk more than 1%-3% of their capital per trade. I can't over-emphasize the importance of this rule. As the old trading saying goes "Amateur traders are concerned with how much they can make; professional traders are concerned with how much they will lose".

Inconsistency creeps in when a trader takes on different levels of risk for different trades without understanding the consequences. This mostly occurs after a trader experiences a string of losses; and packs on the risk to make up for these past losses.

2. Discipline simply means setting trading rules, building a trading plan and trading according to only what you have planned. Remember that much of successful trading is counter-intuitive. We must exercise discipline at all times so that we never deviate from our original plan.

This rule becomes all the more important to aspiring traders who decide to abandon a trading plan and conclude that trading is "risky" after a couple of negative results.

Is it possible for you to be a successful trader? The answer, is an emphatic YES!

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