Understanding What Makes A Trading Success
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Many beginner traders are searching for that Holy Grail of trading success, which for them is finding the perfect indicator to attain the ideal entry. Let me state exuberantly that there's no such thing as the ideal indicator. Why do people believe that there is? It's been recommended that traders accept that being involved in the entry of a trade somehow implies they have control over the market. It's correct that when you enter a trading position, you have profound control of the entry, but that is where your control ends. You have no control over the way the market will behave, since the market will simply do as it wishes. It's not when you purchase the stock that controls what quantity of money you make, but when you exit and what amount of money you put into the trade in the 1st place that determines how much cash you'll make. This is the core principle of wonderful money managing as being followed by any Metastock expert. With any trading program there will be wins and there will be some losses. Many successful trading have success rates only of 30% to fifty percent and they are still seriously successful overall. This is down to the fact that their rewarding trades far surpass their losses. Let me explain how this may happen. You trading program may offer a profitable trade one third of the time. It is reasonably possible that each profitable trade may be 4 times more profit-making than the equivalent loss in the losing trade. A winning trade may generate, for example, a profit of $400 and the equivalent losing trade a loss of $100. Even though the system wins on average only a 3rd of the time, the overall result is a lucrative one. The rationale is that each winning trade more than compensates for the losing trades. That is an element of the trading success. In this particular example, over 3 trades, there would be a profit made of $200. Therefore, trading is not all about finding the perfect indicator to get the entry just right. You need to think about other things, such as proper money management. Money management is managing your risk. It is a set of rules and guidelines you set up to minimize your risk. Remember that each trade is individual and whether you win or lose has nothing to do with what has come before. It is important to acknowledge that with any trading system that you create, a certain number of trades will go against you. There is no such thing as a system that is one hundred percent successful, just as there is no perfect indicator which will provide you with the perfect entry every time. In summary, no system gets it one hundred percent right and each trade is independent of the previous trade. Excellent money management rules ensure that your positions are small enough that you don't blow your capital, yet are large enough to maximize your profit. Get these rules to maximize your risk in place and enjoy the rewards of a well functioning trading system to achieve your trading success. Look for a Metastock download to help you get started on the right track.