Uploaded by Nitu Singh

Ebook

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Table of Contents
CHAPTER 1: THE ART OF TRADING
CHAPTER 2: LEARN THE INS AND OUTS OF TRADING
CHAPTER 3: DEVELOP THE RIGHT MINDSET AND WINNING
ATTITUDES
CHAPTER 4: UNDERSTAND THE NATURE OF TRADING AND ACT
ACCORDINGLY
CHAPTER 5: FINAL THOUGHTS
1
1
3
7
10
13
Chapter 1: The Art of Trading
Trading can be considered an art—an art that can be learned and eventually mastered.
It is a rewarding business that is fairly easy to get into since it does not require any formal degrees or
special trainings and the costs of opening a trading account is relatively low. Furthermore, with the help
of technology, individuals can trade from the comfort of their own homes. Despite the logistical ease of
getting started, people should
never assume that becoming a
profitable trader is easy.
Traders who already have a broad
experience in the industry would
attest
that
achieving
success
depends on a variety of factors,
such as hard work, planning a
strategy, research, and discipline. Just like in other fields, there are specific principles which when
followed, may significantly increase a trader’s chances of success.
When you trade in the financial markets, there is no ceiling on the amount of profit that you can make.
However, if you enter the world of trading as a ruthless gambler, you are surely doomed to fail. On the
other hand, if you engage in the art of trading as a genuine businessman who deeply understands the
fundamental relationship between rewards and risks and hard work and remuneration, then you can
enjoy limitless opportunities.
2
Before proceeding, you need to understand that this business requires a lot of “figuring out,” discipline,
patience, and practice. Most importantly, it takes time to finally perfect the art of trading. With this, you
need to have the dedication and willingness to properly learn the ins and outs of the industry.
Being fully aware of the massive size of this challenge means half the battle is won. Though talking about
it like it’s a risky and demanding pursuit does not sound too refreshing, it is important for you to see
both sides of the coin before deciding to flip it.
It is a big decision to take trading as a serious endeavor. Be sure to do justice to it and try your best to
make as much profit as you can.
3
Chapter 2: Learn the Ins and Outs of
Trading
Becoming a successful trader is a gradual process and the journey to successful investing is a long one.
To be successful in a certain industry, you should master the basics of that business. With the increasing
popularity of trading, you will undoubtedly find tons of educational resources, both online and offline
which you can use to equip yourself with all the basic knowledge that you need.
Try to browse through various kinds of educational materials until you absolutely understand everything
there is to learn. If some concepts are not that clearly explained by your reference and you have some
unanswered questions in mind, you can search the internet or other sources for further elaboration.
2.1. Trading: A Lifelong Education
Think of trading as something that
requires continuous education. You
should try to stay focused on learning
more about the industry each day and
keep in mind that understanding all
the intricacies of the financial markets
is an ongoing process.
By conducting thorough research, you will be able to learn the facts, such as what the various economic
reports mean. Once you begin to improve your observational skills and focus, you will develop an
instinct that will allow you to understand and predict how these different economic indicators affect the
financial market that you are trading.
4
World politics, global events, as well as economies have an influence on the markets. The more you
understand the past and the current market environment, the better prepared you will be to face future
market situations.
2.2. Learning from Other Traders
Sometimes, books and online resources wouldn’t be enough to help you become a knowledgeable
trader. You should also consider gaining
more insights and learning tips from
more experienced individuals.
An easy way to meet other traders is to
register for a trading community. Join
forums to be exposed to traders from all
walks of life and with varying levels of
experience, and discuss anything related to investing in the financial markets. This includes sharing
perspectives about brokers, trading methodologies, basic and advanced strategies, trading platforms,
among others.
Getting acquainted with the ideas and activities of people who are also involved in trading, as well as
knowing their techniques for survival is crucial in helping you develop the proper mindset. Furthermore,
learning about the experiences of other traders will prevent you from adopting unrealistic expectations
and misconceptions about trading.
2.3. Sign Up for a Demo Account
All online brokers offer free demo accounts that people can use to practice trading. It is highly
recommended to try trading with virtual money, before investing your hard-earned cash in volatile
5
markets. The good thing about this is that most brokers allow individuals to use their demo accounts for
an unlimited period of time—this means that you can practice for as long as you want.
Signing up for a demo account is fast and simple.
Typically, it only requires your email address and
some
contact
details.
Once
you
have
accomplished the registration process, you can
download the trading platform for free and start
trading with virtual money.
One of the most popular and user-friendly
platforms is the Meta trader. The majority of
online brokers nowadays offer the Meta Trader
4 platform (MT4 Platform), which can be installed on various types of devices, including smartphones,
tablets, and desktop computers. Just like the demo account, the Meta Trader platform can be used free
of charge.
2.4. Take Advantage of Technology
Electronic trading has been around for quite some time, and the tools that traders can use are
constantly evolving. In order to become a successful trader, make it a point to expose yourself with the
latest technologies and powerful tools that are being developed.
Charting platforms enable traders an infinite number of ways to view and analyze the financial markets.
There are also new and improved ways to test trading systems more accurately on historical data, which
proved to be effective in preventing losses.
6
As smartphones become
more a part of everyday
life,
mobile
applications
developed,
possible
trading
were
making
for
it
modern
traders to monitor their
trades and get market
updates
virtually
wherever they are. These apps also allow traders to study trading setups, manage positions, enter
orders, and perform a variety of other related tasks. Hence, greatly boosting trading performance and
providing a tremendous level of flexibility.
Take full advantage of available technological advances for it can bring you great rewards and help you
maintain an edge on the market.
7
Chapter 3: Develop the Right Mindset
and Winning Attitudes
To be successful in trading, you must
consider it as a full-time or a part-time
business. When you regard it as simply a
hobby, the tendency is that you will not
make a real commitment to learn the
complexities of the market and it can be
very expensive. On the other hand,
when you consider it as a job, you might
get frustrated or discouraged because there is no regular salary. With this, instead of considering it as a
job or a hobby, think of it as a business.
Just like any other type of business, trading involves losses, expenses, risk, taxes, stress, and other
related factors that you need to take into account. Moreover, you should also have short and long-term
goals.
3.1. Focus on the Bigger Picture
As a trader, it is very important for you to remain focused on the bigger picture. You should not be
disheartened by losing trades and must see it as a normal part of trading. Similarly, you should see a
winning trade as just one step along the long journey to profitable investing. Bear in mind that it is the
cumulative profits, which really matter and make a difference.
8
Once you fully accept that trading involves cycles
of wins and losses, emotions will have a lesser
impact on your trading performance. It doesn’t
necessarily mean that it is wrong to get excited
about a significantly profitable trade, but you
should always remember that a losing one is not
far off.
Losses are inevitable in trading and regardless of claims that some trading systems are 100% profitable,
the truth is that many effective trading plans win only approximately 40 percent of the time. The
important thing here is to make sure that you earn more on each winning trade, compared to the
amount you lose on losing trades. This is exactly what allows traders to become profitable over time.
3.2. Set Realistic Expectations and Goals
It is essential to set realistic expectations and goals, in order to keep trading in perspective. If you start
off with just a small trading account, do not expect to immediately earn massive returns. Remember
that a 10 percent return on a $5,000 account is very different from a 10 percent return on a $500,000
account. Try to remain sensible and work with what you have in your account.
3.3. Keep Your Emotions in Check
It is often said that successful trading is about 80 percent psychological and 20 percent methodological.
Emotions are the number one enemy of successful trades. With this, even though some traders have
reasonable knowledge about fundamental and technical analysis, they sometimes incur huge losses if
they do not have the right trading psychology. It is traders who are in psychological control who win
most in the financial markets.
9
Traders must always keep their emotions in check and
adopt winning attitudes, skills, and behaviors in order to
respond to market conditions and opportunities
appropriately. Take note of the fact that a trader has the
ability to create his own results.
3.4. Skills and Attitudes to Acquire
In
order
to
become
competent in any activity,
whether it is a physical or
mental one, an individual
must
acquire
certain
specialized skills and attitudes. The following are some of the skills and attitudes that a trader must
develop to become a successful one:

Learn the dynamics of goal achievement in order for you to focus on your objectives, rather than
on what you fear.

Know the skills that may help you as a trader and then focus on developing them instead of the
potential profits that you may earn, which is merely a by-product of these skills.

Learn how to adapt and readily respond to fundamental changes in market conditions.

Identify the amount of risk that you can handle—your risk comfort level—and figure out how
you can expand it.

Learn how to execute trades immediately upon perceiving an opportunity.

Maintain a state of objectivity.

Control greed.
10
Chapter 4: Understand the Nature of
Trading and Act Accordingly
It is important to realize that trading in the financial markets is a very risky endeavor. With the high level
of volatility involved, you should always remember to risk only what you can afford to lose.
Though individuals trade in order to make money, it is important to acknowledge that the market
doesn’t always move in your favor. Therefore, you should only fund your trading account with money
that can be lost without leading to failure to meet other financial obligations. Losing money is
depressing, but it is even more depressing if it is money that should not be risked after all, as it is
intended for another purpose.
This means that you should certainly not risk the money planned to be used for your child’s college fund
or daily living expenses. Aside from the fact that it can result in disastrous circumstances, trading with
money that you can’t afford to lose can put you under a tremendous amount of pressure.
11
When an individual is under that kind of pressure, it may lead the person to make terrible decisions, and
ultimately, unfortunate financial losses. Before deciding to invest money, try your best to make an
honest and objective assessment if the money that you’re about to risk is truly expendable. If it’s not, it
is advisable not to fund your account with it.
4.1. Learn Risk Management and Capital Protection
Proper risk management and capital protection is what will keep you
in the game. You should avoid risking too much capital on a single
trade—the accepted standard is no more than 2 percent. Those who
have only small accounts find that this limits their ability to make
huge profits, and therefore, tend to risk far more. If you do this, all it
takes is a series of losing trades to crash your trading account.
One way to manage the risk and protect your capital is to trade with
a stop loss. By setting a stop loss, your risk for each trade will be
limited.
4.2. Devise a Trading Plan
For a business that is as risky and complex as trading, strategizing and devising a plan is absolutely
necessary. Keep in mind that the driving force behind a trading plan must be your thorough research,
and not merely emotions or speculation. With all the information that are readily available, especially
over the internet, it is very tempting to rely on the research or work of others.
However, you should know that not because it is profitable for someone else, it will automatically work
well for you too. Trading is so dynamic that trading systems are not one-size-fits-all. What you can do is
12
to read through and study the works of other traders to just get some ideas and then devise your own,
depending on your trading style.
One thing to keep in mind is that when you develop a plan, have an exit strategy ready even before
entering any trade. The exit strategy must tell you how you will get out of a winning and losing position.
4.3. Know When to Stop Trading
Basically, there are two major reasons to stop trading.
One is that your trading plan is not effective and you are losing more money than expected in historical
testing. Do not be dismayed when this happens because markets are constantly changing, and interest
and volume in trading instruments widely
vary. With this, know that it is okay if your
trading plan does not perform according to
your anticipations. Take a step back and
reassess the trading plan objectively. If
your
trading
system
proves
to
be
ineffective, consider it as a problem that
has to be solved, and not the end of your business.
Secondly, another major reason to stop trading is that the trader is not effective. There are several
factors that can adversely affect trading performance, such as emotions, poor health, and stress factors.
A trader may be able to come up with a really good trading plan, but it will surely fail if the individual
fails to execute the strategy properly. If this is the case, it is important for the trader to take it as a
personal challenge and conduct necessary measures to improve the situation.
13
Chapter 5: Final Thoughts
Some may have told you that you have to focus on simplicity. That you need to discover a few trusted
setups to execute with discipline every time they appear, and that all you need to become profitable is
to have a good trading psychology.
Trading in the financial markets is not about clear-cut simplicity. It is being comfortable with ambiguity
and being able to manage confusion. It is about uncertainty and complexity.
A few simple setups traded mechanically would not give you a true lasting edge in the market. Choose
to learn the art of reading the market
and synthesize various elements such
as price actions, intermarket themes,
and market internals. Only then will
you find out which setups to utilize
under certain conditions.
Though trading psychology is largely
important, it is not everything. You
need to have a consistent edge that can be attained by dedicating yourself to learning to analyze the
markets, as well as how to execute properly in context.
Experienced traders who became successful in the industry did not just spend their trading days
mindlessly waiting for technical indicators or setups to line up. They took time to read the markets from
minute to minute, hour to hour, discerning the odds of doing this or that, dynamically adapting, and
trying to come up with fresh trading ideas as the action unfolds.
14
So dedicate yourself to this mental sport. Start practicing and develop your skills. Commit mistakes, take
losses, and be absolutely clueless. Do not be afraid of it, for you have to go through all these to progress.
That’s the only way you’ll succeed in this industry.
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