Becoming a successful trader is one of the most difficult career choices anybody can make. Although the potential for success is enormous, achieving consistent profitability is extremely difficult. I’m sure at some point, for all of us who navigate these tricky waters, at some point or another we doubted the choice to trade. However, if one participates in the context of a winning strategy and mindset, the stock market can become a very rewarding place.
Consider that pretty much you can zoom out a graph for any asset, and pick any time in history to buy pretty much anything and eventually that purchase would’ve handed you a return if held long enough. Of course there are exceptions, and some wins are bigger than others, but in the general sense, the stock market is always going up because economies are always growing in the broad trend even if they might have their slumps that can last for years.
In any case, here are 5 tips and secrets that I have learned in my 3 year journey that have helped me so far to navigate the markets:
- The Stock Market is 99% psychology and 1% technical: The real secret behind reading candlestick charts, which you should be using if trading, is that they represent the behaviour of the actors who are buying and selling the asset and not necessarily the performance of that asset. Every single piece of news, rumor, earnings call, or anything else can be interpreted from reading the charts. So try to understand the people better than the companies.
- Making money is better than being right: At the end of the day Losing money makes you wrong, and making a profit makes you right. As traders and investors it is our job to understand and participate in the market that is present at the moment, it is not our job to agree with it.
- Scale into trades: once you have decided the full position of a given play you are going to make, buy a third of that. There is a real difference between averaging down a winning play and adding to a loser. So make sure that trades are valid, and add to your winners and cut your losers.
- Learn from your losses: If you can take a lesson for everytime you lose, then soon you will be making very few mistakes and those losers might as well be considered an investment or tuition. If we lose, don’t learn, and keep repeating the same mistakes, it will get expensive very quickly and our participation will come to an abrupt end.
- Always have a plan B: you should never put yourself in a position where if you are wrong, it will be catastrophic. There are no sure bets, we have all seen companies go down on earnings beats, others go up with dismal performances, media manipulation, accounting scandals, political situations, natural disasters, pandemics and the lot that can make any sure bet go haywire. You can never know what the future holds so always be prepared and position yourself in order to survive to see another day.