It is buying or selling securities or commodities. i.e The buying and
selling of futures contracts is known as trading. Trading is differentiated
from investing by two factors. The first is the time frame involved,
as trading is completed often in minutes or hours, and very rarely
more than weeks are involved, whereas investing is done for months
or years, more of a long-term modest gain motivation. The second factor
is the strategy used, which complements the fast timing of trading,
as indicators are often used to help let a trader know when to get
into or out of a particular position.
characteristics of a successful trader are:
Each trader must learn to deal with uncertainty. Most trading situations
are neither black nor white but a shade of gray. Trading is an uncertain
Each trader must develop a personal risk management program. Part of
this approach must include a definitive method of removing trading
profits from the market. Deployment of these profits are best directed
to a lower risk category of investment.
Each trader must develop the ability to focus. A one market approach
may be the answer for some traders while a single trading approach
to several markets may prove to be successful for other traders.
The successful trader has to
identify a signal or marketing oppurtunity
feel good for both profit or loss
demonstrate self confidence
exercise his independence
Most of the traders
lose money in their trading because they lack motivation
and clear understanding in what they are doing.
The suicidal trading type is bent on committing financial
extinction by jumping in front of moving trains. They insist on selling
into run away markets only to see the market moving higher.
The euphoric trading type has no plan of withdrawing
profits from the trading account. A hot streak comes along and each
successive trade is larger than the first as all profits are back into
the market until the loss comes while our euphoric trader is up to
his eyeballs in contracts. Not only does he give back all of the profits,
often the account is wiped out and possibly more. The
traits of a successful trader are Courage and Persistence.
planning is very important. The trading plan prevents the
loss by identifying the risk of a trade before taking the
trade. A planned trader understands that markets don't always
stop and reverse exactly at projected price and time targets.
Nor do they always continue in the right direction even after
reversing from a target zone. Losses are part of the cost
of doing business and must be managed. A single loss must
never become a disaster and when the conditions calling for
the original trade continue to exist at the next price and
time target. The honest trader has the emotional capital
to get back.