Making trades in the financial markets, whether or the Stock Market; the Commodities Market, Futures Market; the Forex Market or the Options Market, involves risky for your hard-earned money.
You must treat trade as a serious venture regardless of whether you are trading either part-time or full-time to be able to be successful and hold on to your gains in the long term.
Yes, you heard me right. You must organize and run it as bricks and mortar businesses.
There is no way to make it through the world of speculation or trading if you do not pay the respect Market. Market deserves. If you do not respect the Market, it won’t give you the respect it deserves, especially in the case of removing money from the markets and holding onto them.
Once you’ve got this attitude, we are able to move onto other essential elements that comprise the trading industry.
The first thing you have to take care of prior to starting an enterprise is to prepare an Organizational Plan. In this context it’s called an Trading Plan.
This is the time to establish your goals you would like to reach. Make them as precise as you can but not too easily or unattainable. Create a goal that you find challenging without making it too difficult an ambition.
With your objective in place, you need to break it down into smaller parts of actions which will help you reach your goal in the end.
This is your plan of action. Be precise and real. If you’re working all-day and don’t have time to be looking at the market on a regular basis do not take an action which requires you to watch your trading positions on a daily basis. You’re getting the idea.
Okay, you’ve made your plans, but what happens next?
Trading Expert David Goodnight says In order to live and thrive in the long-term, you must be able to trade in the market is a must. You need to be consistent with your purchasing or selling of your market-based products such as stocks for example.
It is also necessary to have an indicator of whether your actions are good and what are errors. I guarantee you that without an official and standardized measurement, you’ll always believe that your actions are in the right direction even when you’re losing money! It’s our default positive human nature that is in control.
The information you require can be discovered within what is in a System. It’s usually called an Trading System. A Trading System is comprised of Entry, Setup, Exit, and Strategies to manage money.
A Setup is an absolute collection of patterns, ratios or terms you should be looking for when you trade.
The Entry point is the place where you “enter” into the markets whether it’s an “Buy” or a “Short Sell”.
An exit is, as the name implies, the actual moment or circumstances that you must close or square off your trading positions that are open. It could be a profit-taking, or a loss cutting.
Money Management, or more specifically known as”the Position Sizing strategies define and clarifies “how much” to buy or sell for entries or outflows. Contrary to what many believe it is actually the most crucial element of the trading System. It determines the likelihood of you making it your profession in trading.
The significance of the importance of a Trading System cannot be emphasized more. It is essential to have the Trading System to perform consistently in accordance with the ever-changing market as well as a way that will tell you when your choices are correct and when you’re in high risk and in risk.
There are two methods you can set up a Trading System. You can design yourself, if you possess the extensive experience in the field of trading necessary to create your individual trading system, which requires immense effort and a lengthy and tedious commitment to your time, or you can buy one of these Professional Trading System that has been proved to have a winning rate of 71.9 percent, as determined by an internationally recognized third-party supplier as in my own personal experience with the system.
Let’s examine the requirements for designing this kind of Trading System mentioned above.
First, you’ll need to figure out how much time you’re willing to commit to looking at the market and watching your price quotes for the market. This will determine the type of trading strategies you’re at ease with.
Decide whether you are going to do Day Trading, which requires your involvement in the market every minute; Swing Trading, where your open trades last from a day to a few days; Position Trading, where your open trades last anything from a few days to a couple of weeks; Long-Term Investing/Speculating which has the most minimal time requirement where your trades can last from months to years. It is the toughest when you plan to monitor the market regularly and will require a huge amount of work and market data to evaluate your strategies.
Personally, I am a fan of Position Trading since it’s a good fit with my needs for time and activities. It keeps me entertained but at a comfortable pace, while providing ample information to constantly refine and test of my theories.
I mentioned refinements to improvements to the Trading System. It is true that refinements are required particularly for the initial Trading Systems. It is essential to undergo a series of phases of refining and improvement of your new Trading System whilst it is being tested on the market in real-life conditions with your money on the line.
I am ahead of myself in this area. Before we can even consider the refinements there are a lot of aspects involved in the process of developing and designing an Trading System. We will return to the discussion of System development.
Once you’ve determined which Trading Style you feel at ease with, you’ll be required to figure out what you will do to implement this style. There are generally three kinds of trading techniques. They are Technical Analysis, Fundamental Analysis and Intuitive or Mental Analysis. They can be employed in isolation or be utilized in combination.
Technical Analysis is a term used to describe Technical Charts and Graphs. There are a variety of technical indicators that can help you to develop your own system. In actual fact you will find so many methods and options that you could be overwhelmed at first. However, if you invest enough time reading books on technical subjects as well as articles about these indicators you’ll be able to sort them into types like Oscillators and Moving Averagesand Trends Divergences and Patterns. Select a selection of these indicators for the basis of your Trading System.
Fundamental Analysis deals with the financial performance of a business and the fundamental circumstances of a business or market. You use this information to develop an accurate and consistent Trading System. You incorporate the reality of the market conditions into your trading System.
Mental or Intuitive Analysis is the subjective way of considering the market. You can make your own judgement by observing your unconscious or past experiences and do not rely on mechanical formulas or fixed patterns of visuals when you analyze. Although not all of these intuitive insights are able to be incorporated in Your Trading System, there is no doubt that it could help you design your System.
After you have created Your Trading Strategies, choose a market in the financial sector that you are attracted to. It can be the Stock Market, the Index Futures Market, the Commodities Market, the Forex Market or the Options Market.
At this point, you can select one. You’ll have go through the following steps before you are able to be confident about trading in the chosen market through Your Trading System. Make sure you make adjustments throughout the process. According to Trading Expert David Goodnight here they’re,
1) Paper Trading. Simulation of the Trading System like you are trading using real money. Try it out with trading software or by keeping an eye on it with historic data. Make sure you are able to refine your System components until you are pleased with the outcome, and make a gain in this case.
2.) You can trade in small quantities or amounts. After you’ve completed your Paper Trading step, you are more confident in the Trading System and you can begin trading a small amounts of stock or contracts on the market you prefer. Do not worry about losing money for right now. Instead, concentrate on operating your System in a proper manner in a disciplined manner. Continue to improve the details of your Trading System here again as you start to recognize the weaknesses within your system. Make sure you test your System again after refinements. If you’re certain you are sure that the Trading System will make you money consistently, you can proceed to the next step.
3.) Initial Actual Trading System using a regular amount of money as specified in the Money Management Strategies. You must ensure that you adhere to an adherence to discipline during the execution of your transactions in line with the rules of your trading System. Be conscious of the psychological difficulties associated with trading that go against your guidelines as outlined within Your Trading System. This is yet another chance to improve you Trading System yet again. When you’re confident in you Trading System again, you are not ready to begin your own trading career.
4.) Actual, normal trading. Control your trading psychology and adhere to the strictest discipline when trading with your refined and developed trading System.
As you observe, there is a lot involved in the design and developing of the Trading System. I’ve personally invested 9 months to design and create this Natural Behavioural Cycle Trading System. I also have made many adjustments to it during the many years of experience trading it.