February 12, 2012

Develop the trader instinct and other lessons on how to trade

Trading stocks is not the easiest endeavor one can make money from, but no-one said it was impossible to learn how. The traders who lose money are the ones who refuse to learn from others and apply what they have learned. Here are 5 characteristics of a successful trader:

  • Always learn and try new ideas. One trading strategy doesn't probably work forever. The market will soon find out what is working and what is not, and you need to find something new the market doesn't know - yet
  • You can't make money every day. You need to accept losses, minimize them, and sell them as soon as possible
  • Hold on to winning trades longer than losing trades. Never hold on to a losing trade, just because it is a losing trade
  • Proper risk management. Set a daily loss limit for a trade. For example, if your trade has lost 5%, sell it no matter what
  • Develop an instinct. The best traders can develop a "feeling" and almost know if the market is going up or down depending on how the market behaves based on past experience

Source: Trade2Win

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