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Are some people just destined to be great traders? Or perhaps some people learn the principles of trading better than the average person. These are all questions I would imagine every trader has pondered, especially on those days when your results are less-than-spectacular. For the record, I have never met someone who was naturally a great futures trader. On the other hand, so traders learn systems and market configurations quicker than others, but learning quick doesn't necessarily make you a better trader. No, good trading is the intersection of technical training, self-discipline, and perseverance. So I think we can rule out the notion that great traders emerge from the womb and begin a career of garnering millions of dollars from the stock or futures market. The question becomes a fairly simple one, then, what makes someone a great, or even a competent trader? Let's rule out some popular misconceptions. 1. Common Sense: If ever there was a useless trait to have trading it is common sense. Don't get me wrong, common sense is a wonderful attribute to possess in the real world. But the stock and futures markets are anything but logical, or even prone to utilizing common sense. Just look at the great mutual fund managers who toil away just trying to match the benchmark for their given field of investing. A mutual manager who invest primarily in the S&P 500 is hailed as great manager if he is able to bear the benchmark for that index. The simple fact is that the market does not behave logically, often times it shows prolonged periods of illogic. 2. Intuition: If common sense is a terrible attribute to possess, intuition is the kiss of death for a professional trader. Since the results of a trade are simply binary (you either win or losse) you would assume that some sort of insight into the machinations of the market would be quite useful. Forget it. Anytime I think I know just what the market is going to do it is time to turn the compter off. I don't know what the market is going to do. Not now, not ever. Quite simply, there are so many variable that go into the pricing structure of a security it is nearly impossible to quantify what the end result of these variable might be. 3. Fool proof systems: Let me state, from the onset, that no fool proof trading system has ever been developed, nor did I expect a fool proof system to ever come into existence. Of course, there are endless numbers of adds for trading robots that will revolutionize trading, and gurus who claim to have broken the trading code. It's all horse hockey, at best. No one has quantified the methodology or pricing structure of stocks of futures. Period. End of story. We have identified, in no uncertain terms, what a good trader isn't. He doesn't use common sense, intuition, or so-called fool-proof systems to make his trades. What makes a successful trader, then? While many novice traders have a difficult time conceptualizing this fact, trading is based entirely on learned probability. That is to say, a good trader can evaluate a set-up or exit and have a good idea of the success rate of that set-up or exit. This knowledge is gleaned from very specific trading and experience. A good trader also understands that even a good set-up has a determined probability of losing. For example, let's hypothetically assume a given set-up has a probability of success of 70%. Those are great odds, a good trade to take. On the other hand, there is also a 30% percent chance of losing in this trade. Minimizing your losses through active trade management is the name of the game, and it what sets good apart from the not-so-good traders. Additionally, let's assume that you have found yourself in profitable trade. Do you let your profits run? Do you exit and take your profits. I use the NYSE tick to guage my exits, as it tells me exactly what the market is doing. I generally set a profit limit and then begin adjusting my stops and limits to facilitate the execution of my trade. (Note: I never move my stop loss down to accommodate a losing trade) So it's probability that we are interested in, whether we realize it or not. Each trade has a given chances of being successful and, as traders, we want to be in the profitable trades and avoid the unprofitable trades. Our set-ups let us know which trades have the potential to be profitable, not common sense, intuition, or the latest fool-proof system. Good traders learn to trade the chart in front of them. They don't trade the daily news. They don't trade the economy, and they don't listen to stock tips from Bill the plumber, or any other no stock advice giver. All the tools and information you need are right in front of you in the form of a chart with your selected oscillators and indicators. Trade what you know, take high probability trades, avoid countertrend trades, as they are often the least profitable. These are all traits of successful investors, and you can be a successful investor. I am a long time retail and institutional trader who now only trades part time, usually in the morning. I enjoy writing informational articles about my style of trading so others may benefit. I endorse a state of the art trading program for beginners at http://www.emini-mavensite.com/tradingconceptsmlm.html -Trading Concepts, Inc. It's an awesome product that will have you well on your way to success. Plus, it has a money back guarantee...you have nothing to lose and thousands to gain.
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