Day Trading Secrets – Three Trading Secrets From
The Pros
The Dynamic Wealth Report
August 24, 2009
Three Trading Secrets Of The Pros
Flopping down on the couch this weekend, I started scrolling through the
TV channels. That’s when I came across a movie I’d see a few times
before – The Replacements. A perfect way to relax on a Sunday afternoon.
It’s a classic football movie about a team of misfits who rise up and
become a great team.
It’s a little cliché, but a fun movie nonetheless. There’s a scene I
always remember. The coach (played by Gene Hackman) is trying to
convince his star quarterback to join the team.
He says, “Do you know what separates the winners from the losers?”
The quarterback snaps back, “The score.”
In the real world, athletic ability sets the professional player apart
from the average Joe. Basketball players run faster and jump higher. In
football, it's strength and acceleration. 350 lb linemen run the forty
yard dash in just a few seconds.
In baseball, its hand eye coordination. Being able to see a 90 mile per
hour fastball and hit it out of the park is a physical skill very few
people have.
In trading, it’s a bit different.
Making money as a trader isn’t determined by genetics or physical
strength. A guy who bench presses 350 pounds has no advantage over the
90 pound weakling.
Professional traders have an advantage over day traders – and it’s not
physical.
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I’ve meet many different types of traders in my life, from the wide-eyed
hopeful beginner to the grizzled old lifer on “the street”. Years ago,
pro traders had better technology and access to the markets. Now with
the internet, information travels freely and real-time trading can be
done from home.
It’s not technology separating the pros from the Joes.
Any pro trader (if you can find one willing to talk to you) will tell
you successful trading comes down to three things. You’ll hear those
same three things mentioned over and over again. Here’s what they are…
First Professional Trading Secret
Have a plan. I know it sounds simple, but it’s not. Too many beginning
traders are looking for the next hot market. One minute they’re trading
commodities. Then they’re trading currencies. Three days later they’re
trading options. They become a jack of all trades, but a master of none.
What’s worse is a constantly changing trading strategy. It’s a problem
many beginning traders have. First they’re investing based on
fundamentals. Then they’re trading based on moving average crossovers. Eventually they’re trading based on Japanese Candlestick charts.
You’ll never see a professional trader changing his strategy like that.
Having a plan is about being focused and disciplined. Identify what
market’s you’re going to trade and study it. Determine your trading
strategy and stick to it. Identify entry and exit points and don’t
waver. Once you have a plan, stick to the plan.
This leads to our Second Professional Trading Secret.
Always control your risk. We’ve all read about traders losing billions
in a single trade. They crash and burn in a big way. Those are traders
who didn’t follow their risk control strategy. Determine where your risk
levels are at. Then make sure you incorporate them into your trading
plan.
Everyone has a different pain threshold. Some don’t think twice about
losing $10,000. Others would be devastated at a loss of $100. Once you
know your level, stick to it.
You can control risk a number of ways. Some traders hedge their
positions. Others use stop loss orders. Still, others have tight exits
they constantly monitor. Whatever method you decide to use - use it and
stick to it. Don’t ever ignore an exit point… not once. That’s how
traders get wiped out.
Third Professional Trading Secret
The third secret goes hand in hand with secret number two. In our second
tip, we talked about controlling your risk. By exiting a bad trade
quickly, you conserve capital. When you have a winner, it’s sometimes
harder to determine your exit. You’ve heard it time and time again… let
your profits run.
It’s very easy to say… but difficult to do.
You don’t want to sell too late and give away profits. You also don’t
want to be anxious and sell too quickly leaving big profits on the
table.
I’ve seen it happen before… a new trader sells a winner. He’s happy to
book a quick 30% gain… only to watch the trade move up and up and up.
Remember, the small 30% winner could be the next 100%, 200% or 1,000%
trade in your portfolio. Be slow to book a winning trade.
There you have it.
These are three professional trading secrets used by the pros. Go back
and read them again. Incorporate them into your own trading strategy and
system. I’m sure you’ll find these trading tips helpful on making more
money than ever before.
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