The Road to Successful Trading

Most people's experience in the market is relatively short and not profitable.They hear about the market and think it is an easy way to make a lot of money. For some this is true, but for most it is not. 

The first trading decisions generally come from tips and recommendations from brokers or friends.  Then some people decide to study the market and find the perfect system. For many people this becomes an obsession that takes up countless hours of searching for something that does not exist and no one else can find.

Traders develop or buy a system and start trading. Sometimes it is profitable, but when it has a few losing trades (which is normal), they change the system, read a new trading book, etc. or go back to looking for tips. At this point, most give up and stop trading. Or, they go on the analysing merry-go-round, keep paper trading and never get any financial success from their trading.

A few realise that the trading system is not the problem and the most important ingredient in trading is the trader.

In addition, a sound set of trading rules is essential to trading profitably. But if the rules are not followed they are of no value.

An average trader will have difficulty making a profit with a good trading system, but a good trader can make a profit  with an average system.

Statistics from surveys of US traders indicate that once a trading system is developed then 80% of the effort in trading is trading skills (trading psychology and money management)

When the trading system is developed and trading skills are learned, a person starts trading. Most traders encounter a setback at  some stage, either the market conditions change or they don't follow their rules. However, if good money management is followed, this is not a serious problem. They may stop trading to evaluate what has happened.

This is where the real decision about the trader's future is made:

  1. They stop trading all together

  2. They find a new system, read a new book, do another course. This can go on forever and successful trading will never happen.
    or

  3. They evaluate what really happened. Mostly it will be that market conditions had changed or they didn't follow their rules.

 Then these traders:
(a) monitor the markets and start trading again but trade small amounts and don't force trades
(b) wait for market conditions that suit their trading style.

 This is an important process to go through. Most traders go through this experience 2 or 3 times before they develop the skills to achieve their trading objectives.

Trading success is a result of consistency, discipline and patience. When you have a trading plan that is built on practical, workable parameters and it suits your personal and financial requirements, and stick to it, then your investing or trading will become enjoyable and  profitable.

Our "6 Step Total Trading Plan" gives a set of precise trading rules that takes the guess work out of investing or trading. Click here for information on our courses.

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There is an element of risk in trading shares, options, futures, currencies and CFD's so money can be lost as well as made. Johnston Investment Management Pty Ltd take no responsibility for any loss arising from any action based on information provided.

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