Monday, April 10, 2006

>What are the 17 STEPS for Successful long term Trading??

There are a series of steps and important questions that any trader must address to work consistently and long term in the markets.
  1. Assess your beliefs about trading and about yourself. Although it’s difficult to grasp, did you know that nobody actually trades the market? Instead, you always trade your beliefs about the market
  2. Determine your objectives for trading. System experts know that understanding your objectives thoroughly is half the battle in developing a system but most people have never taken the time to even consider what their objectives might be.
  3. Understand the big picture. What’s the market doing overall and how can you measure it for yourself? It's important that you know how to determine the big picture for yourself and how to measure it.
  4. Include three strategies that are compatible with the big picture in your business plan. Although there are thousands of systems out there, there are not many types of strategies. Know the essence of ten key strategies that you could use, the general picture of how they work and how you can adapt them for yourself.
  5. Understand what your personal edges might be and how they set you off from the crowd. Having an edge in the markets isn’t just a slight advantage; it could be the pivotal difference in your success. So it’s very important to list your edges in your business plan and be able to capitalize on them. You need to know the key edges that almost any investor has over market makers or institutional investors. Or if you are a CTA, hedge fund, or portfolio manager, you need to know what your key edges might be.
  6. Understand the key systems that almost every business must understand and start to think about developing structures for those systems. From marketing to cash flow, to back office and clients, trading is a business and should be regarded as such. More importantly, developing the right structures and systems is crucial for business success. For example, if you are a private trader, you must deal with clients – even if those clients are you and your family.
  7. Select your trading market based upon two key factors. Learn what you need to know so that you can determine the following: Are you going to trade stocks? Are you going to trade futures? Are you going to trade mini-forex or real forex through the big banks? Are you going to do options on any of these? What market will you trade? Whatever you select must take into account the big picture and what is likely to happen in the next five to ten years.
  8. Develop a worst-case contingency plan. Most people don’t even consider this crucial component until it’s too late, but the key to a successful business plan is to be able to overcome disaster.
  9. Know about strategy preparation. There are several key sub steps that you should take before you think about trading. You need to know what you should do to get ready and how to follow up.
  10. Know the key steps in strategy development and how to test for each. You’ll need to understand how to test exit signals, determine what your initial risk will be, and select and test your profit taking exits.
  11. Properly evaluate your system. Know what information you’ll need to gather to really test and compare your system with any other system. It's good to have a formula that will allow you to compare your system with any other system in the world and rank that system. Thus, you’ll know whether your system is weak, average, good, excellent, or superb.
  12. Master a simple way to get to know your system well without a lot of cost. You need a method to understand if your back testing is accurate. And, to understand what the worst-case scenarios will be for your system. Through this testing, you’ll be able to develop a simple position sizing model to fit your objectives.
  13. Work on your objectives to actually develop position sizing models. This step is one of the keys to developing a system that fits you.
  14. Know how to do a complete self-assessment. A successful trader needs to know the answer to these questions: How does my personality type impact trading? What is the most important attitude that I must have as a trader and how can I assess if I have it? What are my beliefs and values and how can I assess them? How do I begin to assess my key issues so that I know what could happen that might really interfere with my trading?
  15. Commitment to do what it takes. There are many things you can do on a regular basis to really improve yourself. And if you have the commitment to really doing them, you’ll be unstoppable.
  16. How to develop a top down approach to discipline. Few traders have the kind of discipline needed for successful trading, but if you combine top-down discipline with regular self-work, you’ll be amazed at the difference in your trading.
  17. Put what you know into action. Learning and studying are very important factors in any endeavor, however the only true way to be successful as a trader is to take action. Getting in there and learning from your experiences.

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