How many Nasdaq traders do you hear complaining.Their stocks move and move more than indices and many other markets.Coupled with one of the best trading platforms in the world the only thing they've ever got to criticise is themselves.
Lots of Nasdaq stocks moved 100% or more in the October move.What makes a successful trader? Someone who's got the confidence to get in there and get part of the action.Someone who is willing to be proactive and search for excellence and not be satisfied with second best just because it feels more comfortable.
All of the worlds greatest traders cannot agree about which trading method is best - But one thing they ALL agree on - without sound money management - as the no 1 priority you are not going to be trading long!! Heres a few quotes:-
"My basic advise is don't lose money" Jim Rogers.
"I'm more concerned about controlling the downside. Learn to take the losses. The most important thing about making money is not to let your losses get out of hand." Marty Schwartz.
"I'm always thinking about losing money as opposed to making money. Don't focus on making money, focus on protecting what you have" Paul Tudor Jones.
"Rule number one of investing is never lose money. Rule number two is never forget rule number 1" Warren Buffet.
Except Buffet didn't apply money management in the way a trader would, he simply chose what he perceived (and mostly turned out) to be good companies under the assumption this would inherently protect any downside. The only time he would sell was when the value or potential of the company could no longer be justified by the price.
In contrast, for short term trading or even longer term investors without access to information and the influence Buffet has, money mangement is essential. However, it can mean a lot more than just cutting losses. It is the way your strategy increases and decreases the size of position and direction based on some criterion, usually the underlying price.
Sometimes your gains can be even more important than your losses since these gains are necessary to offset your losses. You cannot consider one without the other. One of the greatests myths is that Traders never lost by taking a profit, wrong! that is precisely how many people do lose over many trades. They quickly learn to cut losses but often take profits way too early, sometimes without any defined criteria for doing so except nervousness and greed, hence the overall strategy usually doesn't work. Taking losses seriously and profits less so is not a logical approach.
I believe that there is not one thing to define a good or successful trader. It is a combination of many factors. You could prob. rank the above in order of preference, but that is still opinionated. What they all have in common is that they are tools of the trade(r).. money management is paramount and a way of trading that you are comfortable with psychological strength to ride the bad times and strangely to not get over excited with the good times, again these are just tools that we can either learn from someone else, books or with time.
If I had to say one thing for sure it would be confidence to implement your money management tools or stock selection criteria, etc.
Without the ability to pull the trigger we are not traders no matter what tools we have at our disposal.
This is just my opinion, relevant to me and my trading style.. yours will of course be totally different
Personally, I think that the right psycology is paramount if you are going to make it to be a good trader. We all know that the knowledge base and the tools are required to help you make the "best" buy and sell decisions. However, if the psyche is not in tune, then decisions will inevitably get tarnished by emotions and other outside influences.
If you want to be the best, do what the best do, I can assure you that they don't follow the crowd and they will only buy and sell based on their own psycology. eg. put on a trade, let the market prove the trade right, otherwise get out!
If person A has a strong technical knowledge base and a weak psycological profile for trading, and person B bas a much weaker technical knowledge base with an excellent trading psycology, who would you back to stay in the game the longest.
I couldnt agree more with what you have said. The reason up to 95% of people lose in this game is because when they place a trade they do so assuming they are correct and let the market prove them wrong. If they changed just the one aspect of when placing a trade to assuming they are wrong unless the market proves them correct a lot more traders would lose a whole lot less money. This is not the same as placing a stoploss because that is the same as the market proving you wrong. I know this is a controversial view but the most successful trader I have heard of does this without exception. In fact he always takes action to start reducing and removing his position as soon as it is placed unless the market immediately proves him correct.