This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This weekend I saw my Dad, and the first thing out of his mouth was regarding the new highs on the Dow.

Then last night a friend of mine who has been reading trading books for quite awhile now (without actually ever making a single trade) let me know that he is putting a rather large sum in the market — specifically the Dow. Since he has been a TA proponent for so long, I asked him what was his reason for entry. He got very defensive. Basically, his reason is that he has been missing out, and this money could have gained much better interest than a money market account.

When I asked about the possibility of actually losing money in the short term, he gave me a long term forecast based upon a book he read regarding the aging of the population, and what that may mean.

I could make the obvious point about fading the crowd, but instead I want to bring up another point that plagues many of us.

We have two people here. One (my Dad) has no interest in the market, and no desire to trade. The other person owns at least seven or eight books on trading. They both reached the same conclusion. I’m not disputing that conclusion. Plenty of tops have been called as the market powered higher. By my previous post, I believe the market will continue to rise over the long term. However, I am not betting either way. When the correction finally comes, it will be painful for those who bought the most recent top. As they are shaken out, the market will resume its trend.

Even after reading all the trading books, and even a few blogs, my friend’s main focus is a fear of missing out. Personally, that same feeling has caused me to take many a bad entry. A fast moving market doesn’t always allow a safe entry with a defined risk. Some times that works. More often than not you will lose money jumping in without any regard for risk. He did say that he would put a stop in place. When asked where, he answered 5%. Remember, he has read quite a few trading books. I asked him if it was possible for the market to have a 5%, or even 10% correction while still being in an uptrend. He agreed that it could, but was unwilling to wait until he had a plan. He wasn’t goint to look at the first chart. When pressed, he said he had a feeling it was going up. Eight trading books later, he had a feeling.

There are a few questions that each of us need to answer before putting our money at risk. Where will I get out if the trade moves against me? What is my target? Is it defined by price, or the way market is acting? All of these factors have much more to do with our profitability than identifying a trend. Without ever making a trade, he has no idea how hard it is to hold onto a winner. Likewise, he doesn’t really understand how hard it is to get in the habit of cutting losses quickly. As his irritation grew, I backed off. I changed the subject to an Escalade I saw on Unique Whips — specifically the sound system. The conversation went back to trading. We were talking about the probability of success. My belief is that my success or failure at trading has absolutely no impact on his ability to be successful or otherwise. His thought was that within about three years he should be a millionaire. I’m not making fun of him. I used to think the same thing. When I asked him why, his answer was that most traders don’t understand the psychology of trading. After all, he read Trading in the Zone. I laughed. Almost everyone has. In fact I recommend Mark Douglas other book, The Disciplined Trader, even more.

This was a long way to get to my main point. We all read the same books on TA, psychology, business plans, strategy, or whatever. However, we also are all plagued with the same emotions that are at the core of our being. I think perserverance is probably the one essential trait for an aspiring trader to be successful. Along the way, you will be beat down, lose money, kick yourself for not sticking to your plan, and maybe even make some money. You have to retain enough trading and mental capital to make it long enough to find a system that fits you. There are a ton of strategies that make money, but a successful strategy won’t work for everyone. Its my belief that if you continue to violate your own rules, you probably are trading a system that’s not right for you.

Btw, he went to a free seminar where they showed drawdowns for different trading systems. He wanted the system that doubled your money every year with only a 5% drawdown. Where do I sign up?

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

So, you’ve just shut down your trading platform after a long day of slugging it out in the markets. You’ve tallied up your gains and losses, wiped the sweat from your forehead, and are ready to relax. But before you get too settled, let me ask you, were your trades any good? Not your trading as a whole, mind you, but your individual trades. How would you answer that question? I bet a lot of beginning traders’ first instincts lead them astray on this one. So, let’s talk about it.

(If you want to play along, stop and decide how you would answer the question before reading on. If you don’t want to play along, I won’t hold it against you. After all, I’m just some text on your screen, surrounded by clever, topical advertising.)

Is a trade good because it made a lot of money? That sure feels good, doesn’t it? But, come on, I wouldn’t be writing an article if it were that easy, would I?

“I get it,” you’re thinking, “You’re one of those R-zealots! So you think a trade is good if it made a large R-multiple.” Actually, I don’t think that’s a good answer, either. What if you got short a stock just before news breaks that the CFO and CEO were found in a bizarre joint suicide, surrounded by shredded financial documents and a baby goat? You’d likely make a lot of money, and a large R multiple. But, that had nothing to do with your knowledge or skill. Unless it was your goat, maybe.

Well, let’s try… is a trade good if the stock did what you expected it to? No way. Unless you think you are trading via psychic powers, don’t grade a single trade on whether the stock acts like you predicted. Stock trading is a probability game. Would you say you did a bad job if a coin comes up tails? Then, never tell yourself you did a bad job because a stock happens to move against you this time.

Hmm… Good fills on the orders? Nope. Got out at the top? Irrelevant. Performance relative to the S&P, or risk-free rate? Now you’re just getting fancy.

The fact is, there are lots of ways to characterize the aggregate performance of a large sample of trades. It’s very important to keep track of your overall expectancy and risk profile, for example. It can be instructive to note if you are often leaving lots of profit behind, or underperforming the indices, or getting lots of sloppy fills, etc. But, all those considerations are meaningless when you just want to judge a trade or two.

What Really Makes a Good Stock Trade

I claim the only meaningful measure of a single trade is how well you followed your plan. That’s it. Many traders today have lots of good information available to them from the outset. So, they start trading the first day with a winning system in hand. But, see Van Tharp’s posts about how often traders take a winning system and lose with it, just by making mistakes in their execution.

How many beginning traders experience a drawdown, and immediately start changing up their systems and strategies? Before you even think about making changes, I urge you to at least prove to yourself that you’ve actually been following the strategy you intended to follow. After all, you are the fallible human in this equation! Execution and judgement errors should always be your first line of inquiry, but you can only do that investigation if you have some data. So, why not take a look at my post about the anatomy of a trade (or Bill Rempel’s post about the aspects of a trading system, if you prefer)? Take those steps, and grade yourself on each trade with them. Based on my article, you might form a checklist like this (or customize one specifically for your trading style):

• Were you trading a stock you were supposed to be watching?
• Did the stock set up according to your rules?
• Did an acceptable entry materialize, after the stock set up?
• Did your position size match your plan?
• Did you manage the trade according to plan?
• Did you do proper post-trade record-keeping?

Try to get to the point where the answer to each question is always a confident “Yes.” Answering the questions will make you own up to the time you traded too big to catch up on your P/L. The time you bought into the high-risk entry because you hadn’t spotted a good trade all day. The time you pulled your stop because you were sure it’d come back. The time you traded a stock you didn’t know, because your friend pointed out it was hot today.

In every one of those mistake cases, you might have made a lot of money. Buckets of it. No matter! You still have to give yourself a bad grade, and try not to do it again. Deviating from your plan means you are trading an unknown system with uncertain expectancy. It’s a sure way to lose in the long run, even if you happened to win big this time. That can be tough to swallow psychologically, but it’s the truth, and if you want to survive as a trader, you had better recognize it.

I’ve never logged questions like the ones above formally, but I wish I had. I do have a Mistakes category in this blog, where I try to tag trades where I feel I’ve erred. If I didn’t tag it as a mistake, I am saying I would take the same trade again tomorrow, whether it was a win or a loss.

I should add that, even if you are the most discretionary of the discretionary traders, I think you can do this exercize. You ought to be able to give yourself an honest answer about whether you considered all the factors you really should have, etc. The answers will be fuzzier, the more discretionary you are, but you can still spot glaring execution mistakes and bad judgement.

Summary

There are at least two time scales on which traders can measure performance. Across a large sample of trades, we can (and should!) use expectancy and other statistical measures to judge our progress. Performance in the small, however, is best judged in terms of how well we executed our plan. It’s entirely possible that the best trade you ever made went swiftly, and immediately, right to your stop. Just as your losing trades can get a perfect score, your winning trades can be riddled with mistakes. Mistakes and deviations from your plan mean you are trading an unknown system with uncertain expectancy. That’s a sure way to lose in the long run.

Introduction

In this article, I’ll take you all the way through all the parts of a stock trade, from start to finish. I’ve had a number of questions in email recently about aspects of stock trades that I’ll cover here, and it strikes me that a lot of people may not have a handle on the total picture. As a result, I think a lot of beginning traders skip or confuse some important steps.

Even if you’ve been trading a while, it might be fun to read through the stages I outline, and see if you can identify similar steps in your trading. If some are missing for you, or are just aspects of a trade that you “play by ear,” then that is a possible opportunity for improvement and growth. I hope this helps some people out. I’ll keep the discussion broad enough that I feel it covers most trading styles.

The Watchlist

Before you can trade at all, you have to be looking at stocks. Which stocks you look at is up to you… just put some thought into it and have a plan of some sort. Maybe you trade stocks for companies you know. Maybe you specialize in a sector. Maybe you watch the most actives. Maybe you use a real-time market scanner to watch the entire market. Might I humbly suggest you take a glance at my stock market scans?

One guideline is in order, though. The shorter the timeframe you want to trade, the more liquidity (think: volume) you are going to want. Especially if you are a day trader, you need lots of shares to be changing hands so that you can get in and out without too much slippage. I’ve seen books say day traders want stocks that trade at least 300,000 shares a day. I think that’s a terribly low figure, considering how many good stocks trade more than a million shares a day. Stick with the million plus stocks.

The Setup

Ok, so you’re watching stocks, but what are you looking for? The setup is the context for a possible trade. In general, you should know what kinds of conditions are best suited for your trading style. Here are a couple example setups:

• Stock is making a new 30 day high/low after a five day bounce (this is the setup that my daily scan here watches for)
• Stock is trending up, and is above its 8, 20, and 50-day EMAs. Also, the 8 EMA is above the 20 EMA, and the 20 EMA is above the 50 EMA. This is the kind of setup advocated in Short-Term Trading in the New Stock Market, for example.

Setups can be as complicated and explicit as you like. I personally use several more criteria on top of that first example when trading that type of setup. For instance, I like to see unusually strong volume, and no significant nearby resistance, and a similar looking move across the stock’s sector, etc. I am very demanding, which is why I only traded about 16 times in August. That’s perfectly okay… you don’t have to trade every single day to make a living.

Entry/Exit Criteria

Alright, one of your stocks is setting up nicely. Time to trade, right? Not at all. A good setup just grabs your attention… before you trade, you have to identify a good entry point. In fact, many good setups will not produce a trade at all, because there was no good entry available. So, let’s talk about what makes a good entry point.

The entry criteria for most traders are simpler than the setup criteria. Remember, if a stock has set up, it’s already basically doing what you want it to do. At that point, all most traders want is a good risk:reward place to get into a stock. Ironically, this means that the quality of the entry point is almost completely determined by the location of the worst-case exit point, or the stop loss price. In general, traders are looking for stops very close to their entry, since this produces better potential risk:reward ratios. To learn more about what risk:reward ratio is right for your trading, check out my article on that very topic.

Here are a couple examples of entry criteria:

• The stock has just broken the high of a narrow, inside 30 minute bar. The stop will be just below the low of that narrow bar. This makes for a nice, tight stop. It must also be early enough in the day that the stock has room to run at least 2 to 3 times that far in our favor. This is what I think of as the dummy trading entry criteria, though I may be oversimplifying.
• The stock has broken through resistance on high volume, and that resistance has become support after a drop back to that level on low volume. The stop will be just below the new support line, once the stock has started a new upward move. This makes for a very tight stop, which leads to good risk:reward characteristics.

There are a number of reasons to chose a stop prior to making the trade. First and foremost, it defines the risk side of the risk:reward ratio. Notice all the emphasis on finding a tight stop in the criteria above? Secondly, it’s harder to think rationally about your stop once you are in the trade. Therefore, it’s best to chose it beforehand, and only move the stop in your favor once the trade is on. Third, as we will see below, the stop value plays an important role in choosing your position size.

While I think it’s crucial to most trading styles to define your risk at this point, I’m a lot less adamant about chosing a profit target. Some traders do, and some don’t. All good traders have a clue about their risk:reward possibilities, though, so you want to at least determine that you think the stock could reach a good risk:reward profit amount. But, whether you choose a strict target or just decide the stock has enough room to run is a personal choice (or perhaps a trading system choice). A lot of traders–myself included–prefer to pick soft profit targets, and monitor the tape to get out early at possible market turning points.

Incidentally, many traders refer to their initial risk as “R,” and talk about their results in terms of multiples of this amount. For example, if my stop is 20 cents below my entry, and I am stopped out, then I say I have a -1 R trade since I have lost my full initial risk. If instead I make a 40 cent profit, then I have made 2 R, since I have made twice my initial risk. Sometimes we also refer to the dollar amount that we risk, or the percent of our equity that we risk, as “R.” When you think about it, it is all just different ways of saying the same thing. I like the cents-per-share characterization, because it makes it easy to calculate what price represents a 3 R gain in a trade, for example.

Choose a Position Size

Since you know where your stop is by now, choosing a position size should be easy if you know how much money you want to risk on the trade. For instance, if your stop is 10 cents away from your entry, and you want to risk $300, then you can buy 300 / 0.10 = 3000 shares. Simple division.

How do you know how much you want to risk, per trade? It’s a personal choice, but I generally suggest you always risk a fixed percent (I prefer 1% or less) of your current equity. So, if you have a $30k account, at 1% you’d want to risk $300 on each trade. I update my risk amount every $1000 dollars. So, say the example account grows to $31k. I’d start risking $310 per trade. Or, if a losing streak takes it down to $29k, I’d start risking $290 per trade.

For a more detailed explanation of the reasoning behind risking a percent of your current account size, you might want to read my article on choosing the right amount to risk, per trade, to fit your personality.

Now for a bit of a digression: About once every couple weeks, I get an email saying “Why pick a stop and then determine position size? I’d rather pick a position size, and let that determine my stop.” In other words, for example, a trader might like to always trade 1000 shares, or maybe they always buy as many shares as they can afford. Taking the 1000 share example, then knowing they want to risk $300, they can determine their stop location. They should put their stop 300 / 1000 = 30 cents below their entry, in that case.

It seems lots of beginning traders like this “size-first” idea, perhaps because they don’t like it when the “stop-first” method tells them to buy only 150 shares. However, I think the “size-first” method is inferior in just about every way. Why? Because if you let position size determine your stop, then your stop will be in an arbitrary location on the chart. Think about it: why would you wait long, excrutiating hours for precise setup and entry criteria to materialize, and then throw out a stop wherever it happens to fall? Doesn’t sound right, does it?

For just about any trading style, you want to the stop to be at a price that would invalidate your criteria for entry. So, if you are trading a break of resistance, then the stop should be a healthy amount below that resistance. That way, if you are stopped out, it is because the break you were playing didn’t hold. It makes sense to get out when the trade is no longer good, right? It’s also very easy to obey a stop that signifies a misbehaving stock. Don’t underestimate that benefit!

Consider if you took that same break-of-resistance trade “size-first”, and your position size says your stop should be 12 cents below entry. If that 12 cents happens to be above or at the resistance point, you will be stopped out with a much higher probability. Your win rate would suffer. Worse, an arbitrary stop invites you to ignore or move it when a trade goes against you. Since that 12 cent example stop has no meaning, you might convince yourself that the stock could turn around if given a little more wiggle room. This happens to traders all the time, and they end up pulling their stops. Many of those traders do not end up trading much longer.

Make the Trade

This is the moment you’ve been waiting for! Put an order in the market, and get in the action! Some traders get in all at once, while others scale into trades across several orders. Do whatever fits your system and your personality best, and do factor in the increased overhead cost of multiple orders if you go that way.

I generally use market orders, because I am trading very liquid stocks, and I want the fastest fill possible. Many traders prefer limit orders, which is also fine. Do whatever works for you, but do it fast: you’ve been waiting so long for the perfect opportunity, it’d be a shame to let it get away.

Here again, I can give a few guidelines. There are two ways to use limit orders. One way is to try to get a slightly better price for the stock. So you buy with a limit at or below the bid (alternately, sell at or above the ask). You can get away with this if the stock price is wiggling around a bunch, but not really moving in a direction. You take a small risk of not getting filled, but you’ll get a slightly better price this way (especially if the bid/ask spread is more than a couple cents). I rarely do this, because the setups I trade tend to produce fast movement.

The other way to use a limit order is to avoid getting filled at a bad price. In a fast-moving stock, issuing a market order can mean a fill 10 cents or more away from your desired entry. To avoid this, you buy with a limit a couple cents above the ask (or sell a few cents below the bid). With this kind of limit, you will either get filled at an acceptable price, or not at all. I’ve seen people get confused and ask why you would ever pay more than the ask, but recall that a limit order gets filled at the limit or better.

Trade Management

As with the watchlist step, there’s not much I can say here, except “have a plan.” If you picked a hard profit target in the previous steps, then your trade management is simple: exit at your profit target, or your stop, whichever is hit first. Other styles will require more active monitoring to determine exits. Some traders will scale out of trades, while others get out all at once. As with entry, do whatever fits you and your system best.

I have to take this opportunity to say one more time: obey your stop. If you only do one thing right, let it be that. If you obey your stops (and you risk a reasonable amount per trade), you will have time to fix just about anything else you are doing wrong. It’s by pulling stops that traders end up losing their shirts (and houses, and spouses). What’s worse is when a trader tries pulling their stop, and the stock happens to turn around for big profits. Please don’t let that fool you.

Another good rule of thumb, which may not be applicable to all trading styles, is: don’t let a profit turn into a loss. This doesn’t mean you should move your stop to break-even if the stock moves one cent in your favor. That’s too extreme. But, protecting some of your profit once you have made a healthy amount is usually a good idea. Many traders chose to move up their stops when they hit 1 R of profit, for example.

Record-Keeping for Stock Trades

Other than obeying your stop (have I mentioned that, yet?), this is probably the most important aspect of a trade. A certain amount of record-keeping is mandatory to do your taxes properly, but that’s not really the kind of information that I’m referring to here.

It’s simple, really: obeying your stops gives you time to improve, and detailed records give you the data you need to improve. What are good details to keep? On top of the normal entry/exit/profit, I suggest a combination of:

• Whatever detail is relevant to your trading style. Ideally, you should be able to look at the information you’ve saved off, and decide all over again whether you would enter the same trade today. So, if you trade MA crossovers, then save off a chart that has the MAs on them. If you trade broken resistance, save off a chart that shows where you thought the resistance was.
• The overall market context. Things like sector charts, or QQQQ/DIA/SPY charts, are good. This way you can review how the overall market impacts your trading system. It can also tell you whether a market turn did you in (or, alternately, saved you!), or if it was an aspect of your system’s criteria that was bad.
• Your thought process during the trade. Write a paragraph about what you were thinking before, during, and after the trade. Try to write this ASAP (I do this just after the market close whenever possible). After a week or so, you will be able to objectively review what you were thinking, and identify errors in your judgement.

I focused above on finding errors and mistakes, but you can also review and reward yourself for trades gone well. Or, even when trades are good, you might be able to spot ways to make them better.

This record-keeping process can be tedious. At StockTickr, a service I use and contribute to, we are doing what we can to automate collecting this data and facilitating R-based performance review. You can see that here when I review my trades and performance… all those charts are collected and annotated automatically for me, as well as reference charts of the indices for that day. It’s a big time-saver. We’re also adding a number of reports that let you see your performance over time from different perspectives.

Besides per-trade records, I also suggest keeping a record on the side of anything that bothers you, or makes you especially happy. You don’t like getting up so early? Write it down. The biotech stocks you are trading are too jittery for your nerves? Make a note of it. As I described in this article, you can use these notes to shape a trading plan that fits your personality better. Sometimes, you don’t know what kind of trader you are until you actually jump in and try it. By noting what you like and don’t like, you can periodically review and improve your trading “lifestyle.”

Summary

Trading is a little more involved than “buy low, sell high.” Here, I’ve tried to outline all the steps that are part of just about any stock trade. I’ve also tried to give some guidelines and rules of thumb, without making the article too specific to any one trading style. It is my hope that traders (especially new ones) go through this list, and identify the aspects of their trading that fit these stages. Making sure all your bases are covered will give you a leg up on the majority of amateur traders out there.

First, vaguely relevant status: It was a pretty flat day today, and I did not make any trades.

Now, on to the matter at hand: Here’s the basic trading workflow I’ve been trying for the last week. It really fits my personality well, as I’ll discuss after I give the steps. There are two phases: the night preparation phase, and the daytime trading phase.

Preparation Phase

• I download updated price data from yahoo finance, (and sometimes eoddata.com)
• I run my custom-coded support and resistance program to scan for stocks nearing an important price.
• When it’s done, I pull up the charts on the candidates (sometimes there are 40 or 50). I throw out the ones that don’t meet my human standards (don’t ask my ex-wife whether I qualify to as ‘human’… just assume I do for our purposes here)
• I update my stocktickr watchlist with the picks, if there are any new ones.
• I place alerts with my broker so that I’ll be emailed if the stocks on my watchlist approach my trigger price.
• I go to sleep with my Blackberry beside me. I don’t set an alarm. I am a night person, so I often don’t wake until shortly after the markets have opened. If I get an email alert before I naturally wake up, my Blackberry wakes me.

Trading Phase

• If the markets are active, and trending, I watch a couple Trade-Ideas scans, jumping from chart to chart, looking for setups that look good for small profits.
• If the markets are boring and flat (like today), I go do something else. I just keep my blackberry with me so I get alerts instantly if something from my watchlist triggers. In a pinch, I can even enter trades from it, but I prefer not to.
• When an email alert comes in, I briefly look at the overall market, the related sector, and the intraday chart of the stock in question. If everything looks as I anticipated, and the TICK isn’t fighting me too hard, I choose my stop, size the trade, and enter the trade.
• If I want to see, in general, what shape my watchlist is in, I glance at my stocktickr page. Just the red and green color of the boxes tells me whether a stock is closer to my target price, and I can drill down to charts if I want the full story.
• I spend a couple hours sometime each day or night reading my favorite trading blogs, listening to my favorite trading podcasts, and generally keeping up to date on what the markets are doing.

Why This Workflow Fits Me

This is far different than the way I used to trade. Why change? Well, many knowledgeable people (Jack Schwager and Van Tharp come to mind, but others as well) urge traders to adopt a trading style that fits their personality. So, a while back I started asking myself, “What is my personality like?” (incidentally, another question you shouldn’t ask my ex-wife!). Two big standout Richard features are that I am not a morning person, and I like variety. This fed my long-term goal to become an automated system trader. I could stay up all night studying the various flavors of math and computer science needed to make profitable market models, and then sleep all day as they are passively traded on my behalf.

That’s great as a long term goal, but my first attempt at making it a reality showed me just how far off that could be. (”Showed” me in the stock market’s favorite manner: by making several thousand dollars evaporate). So, what can I do in the meantime? What I’m trying here is to use the models that I have as sophisticated scanners rather than full automated systems. I massage and filter their output by hand to arrive at a realistic watchlist, which I then trade actively once I’ve received an email alert. This gives me some (maybe even most) of the time and sleep benefits of the automatic trading goal, while also keeping money flowing in. It also keeps me focused on further devoloping the models, because I still use parts of them.

Example of a Workflow/Personality Mismatch

If you were reading my blog in March or so, you may remember that I tried an approach where I just followed a basket of biotech stocks, and tried to become an expert in every aspect of them. That was a disaster! Only 20 stocks? I was so bored! Reading press releases, and understanding their products… blech! Despite how wrong I know it is, I actually used to take trades just to break the monotony. A big warning sign! As it happens, I didn’t lose money using this approach, but I was definitely not happy to start my trading day. Another warning sign.

So, that biotech idea was an example of a trading style that doesn’t fit my personality. So far, I think my new workflow fits me well. Trading is fun for me this way, and I don’t have to fight the tendancy to overtrade as much. I can just remind myself that I’ve already identified good trades, and I simply need to wait for the email alerts. When I am watching Trade-Ideas, I am very selective, and usually only looking to catch a quick 10 cents here and there to stay sharp and augment my income.

How To Pick a Trading Style

So, how do you know if your style fits you? The easiest way to tell, I think, is to be very aware of what you don’t like when trading. Keep a notepad nearby and try to jot down everything that annoys you, or makes you feel uncomfortable, etc. Take the five problems that pop up the most, or that are the most negative, and try to think of adjustments you can make. Note that we’re primarily looking for stylistic or environmental issues, and not poor trades. That said, consistent poor execution can be a symptom of a mismatch between your trading and your personality.

Examples: Don’t like the frantic pace of stocks? Maybe you have a bond trader in you, just dying to get out. Don’t like trying to track hundreds of stocks? Consider specializing in a sector, or trading e-minis. Would you rather trade at night? Maybe you are an FX trader, or even a DAX trader. Can’t take the mental strain of systems with low win rates but big gains? Look for a system with a higher win rate, probably with lower per-win gains. Do you have too many distractions at your home office? Look for a trading room or office space away from home. Are you bored or lonely at lulls in the market? Find a free or paid trading chat room–they’re probably bored too, and you can take turns mocking CNBC hosts until action picks up again. You get the idea.

Summary

There are an unbelievable number of ways to trade, so there is no reason for you to settle for a type of trading that doesn’t fit you. Often we read books or websites and mimic our trading heros. This is a good way to start, but it is never the way to finish. It’s like writing music or novels. Learn from the masters, but find your trading “voice”. Not only will you be happier, but you’ll probably be more profitable, as well. It can take some experimenting–I’m still experimenting—but it is rewarding when aspects of your trading resonate with you.