Can Trading be Profitable?
There is a unique difference in the strategies that are used by investors and that which are used by “traders”. To best define the two we will classify investors as those looking to provide cash in exchange for equity in a company to be able to share the profits of the company. Investors are looking for long term opportunities.
Investors understand that power of compound interest and the power that comes with making consistent returns on your capitol over time. Investors strongly align and believe in the mission of the company and support their overall business practices.
Investors have a tendency to develop an emotional bias over the stocks in their portfolio. Many long term investors are not clear on their objectives. Failing to define a goal can potentially lead to holding on to failing companies. Investors must focus on the fundamentals of the company and not rely on their emotional bias.
Traders are not looking for the same items that long term investors are looking for. While many investors tend to like stocks with less volatility as they are easier to track, Traders are looking for stocks with high volatility for quick plays on the movements.
Many individuals who are not full informed on the strategies and techniques used by swing traders, hold positions for generally a few days to weeks, or intra-day traders, typically hold positions for no longer than 1 business day. The lack of information regarding trading can lead to misconceptions such as, intra-day trading being similar to gambling.
High-skilled traders are very detail oriented and patient when it comes to the execution of their trades. With so much uncertainty in the market traders become equipped to be able to profit regardless of the market conditions. This is accomplished by not developing a personal bias to the underlying asset and trading the market based on what the market is currently doing and not what I personally want it to do.
This post is going to outline the Top 3 Tips you need to make your Trading Profitable.
Many individuals starting off today in the stock market have the wonderful option of being able to paper trade. I personally started off trading stocks on a paper trading account. The concept is quite straight forward, it is a regular broker and you have access to live market data and you are provided with a digital account with funds for your to begin practicing investing with real time data.
Personally I had my paper trading account for a few weeks and then decided to go live. Now for anyone else who has transitioned from Practice account to live account you can agree that something changes. Its not the app, it’s not the numbers on the screens, or the way you enter trades. The only thing that changes is your psychology.
When you switch from a demo account to a live account now every penny matters a little more. Unlike in the demo account when you were down a few hundred dollars you didn’t care, with your live account just wait until you are down $5, what about $50.
That first day that you have a major loss. This could be considered a great portion of your account. It could have been due to poor risk management or over leveraging. Regardless the most important thing that is done once the first large mistake is made, do not quit. Becoming a trader will take time and discipline. You can not rush the process of enhancing our skills. The only way to develop consistent returns is to be extremely disciplined.
Record your Results
The only way that you are going to be able to determine if you are becoming more profitable in your trading is by recording your trades. Now this does not just mean that you celebrate and record your winning trades. But you must also make sure to include any loosing trades. Providing a bit of feedback or insight on the reflection is incredibly helpful.
I personally use web-based services such as Tradingview to be able to save some of the most record of my chart analysis. Some individuals prefer to use traditional paper and pen methods for recording their trades. Other individuals who automated tracking services which document their trade for them.
How ever the method may be that works best for your make sure you record all trades and reflect back on them frequently. As we move forward with our trading journey we need to be able to trace and monitor our progress. This will help us find a areas of opportunity for us to be able to focus on a specific part of our trading to enhance on.
Getting the Education
Many investors enter the market with confidence and bravery only to leave with their spirits knocked down and with a bad taste regarding the market. This happens when your first major loss occurs and you as a trader were not prepared to be able to either repair your trade or be able to gain from the move in the stock.
Just like any profession, reaching the level of mastery takes time, patience and most importantly lots of learning from others. Most importantly learning the right things from others. One can head to YouTube and start to gain access for free to a wide library of traders sharing their stories in hopes of gaining insight in their trading. This can result in potentially learning more about what you should not do as compared to learning about what should be done.
Focus on finding sources that you trust that provide unbiased education for your trading. Its important that just like with any other craft you find a coach or a mentor that can help guide you during this experience of becoming a proficient trader.
Having another resource available to support your trading journey will ensure that you do not fall for certain pitfalls that many novice trader fall for. In addition, having a guide on your trading experience will build confidence and consistency which will lead to more profitable trades overall.
When it comes down to the fine details make sure you have the proper resources to conduct your market research. Although based off our own personal experience some of the main elements that a successful trader has incorporated into their life includes being committed to enhancing their skills on a daily level through commitment in their practice, they record and document every trade taken, and they continue to learn more everyday to enhance their skill set.
Overall the success of the trader is dependent on the individual and there is no perfect cookie cutter recipe for the perfect trader. Every individual responds differently to the market and finding the method that works best for you may not be the method that works best for someone else.
The key to become incredibly successful in this industry is to not compare yourself to others consistently. Focusing on your own trading habits, skills, and routines will be the driving force towards guiding the success of your trading.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
Air Market Group content is provided solely by Air Market Group LLC and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. Air Market Group, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. Air Market Group is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. Multi-leg option strategies incur higher transaction costs as they involve multiple commission charges. Air Market Group is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.