In my series of articles, we have covered the importance of accountability which means having the right attitude toward your trading even before you open the computer or a book. We will move onto many more articles related to psychology and trading itself. We also need to address building a strong base for a framework to actually trade, once you have your base you can refine, adjust, and tinker around the edges to super-size your success but a robust base is an absolute must.
We can break this article down into two parts. The first is the search for knowledge and how to look to build your strategy. The second is the simplicity you will need within your strategy to be successful.
In trading you will always be learning but this is about research to build from, the research process cannot be rushed, it will take considered thought and an attitude as if you are studying for an exam. Trading is a strange world when starting off or are looking for a strong base, you need to navigate the noise of people selling courses, indicators and sometimes selling unobtainable dreams. I feel you have to treat the research as if you wanted to become a professional in any other industry. If someone told you that you could become a successful doctor in 1 year, you would likely not believe them (and would definitely not let that doctor treat you) so why apply the same attitude to trading? I am not saying you need 6 years to be successful but you do need the attitude of steady progression and having to build up your knowledge and experience over a reasonable amount of time. Trading will not bring you wealth instantly.
As with most points with trading, you have to start with yourself. As previously mentioned, you need to trade what reflects your personality. Pick a strategy that suits the time of day and that suits your life style and you have the time to concentrate with genuine focus. Getting this right with dedication and concentration that suits you will guide you to a basic strategy and from this point you can develop to build success.
But after talking to many traders I want to concentrate on the journey for knowledge to construct your personal style of trading. There are many strategies, indicators, social trading, even EA’s either to buy or for free on the internet. This noise can make your path to success long and winding as your choices can be influenced through promises of wealth or instant success. This is where you need to look inwards and use the knowledge out there to build a strategy around you, for you. The only way to success is starting with yourself and adding knowledge to build around you.
Some may say your trading strategy is not as important as your mind set you apply to it. Even though I do feel this is true, your trading strategy is the bedrock of your psychology and you have to be comfortable with it, it has to be familiar and you need to embrace it. You have to be settled with no worries about your strategy otherwise it will undermine your trading. You need to be comfortable within your strategy it is where you fall back too if things are not going well. This is the rest point to mould, shape and make your trading work for you as blindly following other people’s trades will never work. Make your own judgement, by all means use people ideas but; develop your own take on them.
My advice would be to look at the traditional indicators and well established Technical Analysis patterns or price action (there are hundreds of variations to suit you). You may find you are a fundamental trader and have a great grasp of the economic landscape to trade from. In my experience either of these will stand you in good stead. As I have found, if you want long-term consistent success, stay clear of all the strategies that promise high probability returns. As each trade is put on, on its own merits. It is a jigsaw puzzle and each time the picture is different.
So if we concentrate on TA as this is how I trade, you need to work through the likes of babypips.com or STA recommended text books and see which indicators suit how you trade and how you put your puzzle together to come to a confident idea for your trade. You will never be right all of the time but with each trade you need to prepared to be wrong.
Keep your indicators to a minimum, as you can get into a cycle of adding and adding indicators and you will eventually become confused. Do not fall into the trap and the cycle that your next new and more powerful indicator will be the one that will bring success. Stick to a small number that are key to the market so you can see the picture form more clearly. You need a clear mind to think straight to trade, so you also you need a clear chart to see what might happen. You can only process so much information so if the chart is cluttered you will not see obvious facts to be true. Complexity is laziness, the misconception that simple charts cannot be true. Clean charts are simple and simplicity can be repeated, which in trading means consistent long term success.
So keep it simple, this is one of the most important points, if it is too complicated you cloud the picture and make your decision making process harder. Why hinder yourself, have simple focused indicators that direct you to patterns that makes your choice for you.
Having a passion for detail, does again not mean multiple complex indicators, it means understanding the simple very well.
In conclusion, start with your personality, add reputable knowledge about trading, add a few indicators that you feel you can read and you can use for each scenario. The cleaner and more simple the charts and your trading strategy, the better the outcome in my experience.