Formulating Your Winning Trading Strategy

“Habits are safer than rules; you don’t have to watch them. And you don’t have to keep them, either. They keep you.”

Frank Crane

Trading can require a great deal of patience. If patience is not one of your stronger qualities, you will either strengthen it or suffer. Everyone experiences a moment of wanting, when you want instant gratification. This can be the downfall of a new, inexperienced trader because formulating a winning plan and learning how to work in the markets takes time and patience. If you want to work yourself into a position of sustained profitability, you must be in it for the long haul. This is something that does not happen over night.

Dr. Brett Steenbarger, author of Enhancing Trader Performance, mentions three development stages when working towards superior performance and success. These include initiation, development and finally, mastery. A newcomer to the market will want to skip the first two and achieve the mastery stage as soon as possible. Ambition is a good thing, but not if it eclipses patience and a willingness to work towards that goal. They cannot skip steps and must start with the initiation stage then move on to development.

Do you know where you stand in Dr. Steenbarger’s three stage system? This is very important because it can help you determine the best approach to your investing activity. It helps you understand where you stand in the process and how far you have come. Motivation is another key necessity that can come out of working through the three stages. Using this system, you can set goals that are realistic and obtainable. This is a great way to set yourself up for success. The more successes you enjoy, the better your overall performance will be.

What happens when someone pays no attention to the three tiered system and tries to jump straight for the top? Unfortunately, they will most likely miss the top and fall right back down, sometimes landing on their face. This can be a very difficult failure to rebound from. Every trader will experience a set back now and again. The key is keeping these as small as possible. Learn from the experience, rebound and move on. It is OK to take a small step back, but pushing for too much at once can cause you to tumble right back to the starting line. Beginning again can be costly, requires more energy, and will also require even more motivation to recuperate from the failure.

The first stage, called initiation, introduces a newcomer to the market. The trader will begin feeling things out. They will be discovering the process for the first time, and may even feel a sense of excitement or pleasure out of the experience. This will also help lay the groundwork for a potential future in trading as their main source of income. The development stage comes next and involves working on the skills necessary to succeed. At this point, the newcomer is not so new and is essentially practicing what they learn and honing their abilities as a trader. Finally, once the trader has learned the system, worked on their skills and perfected them with success, they can consider themselves a master.

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