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Wednesday, 3 November 2010

Trading is a Business

by  : Kerry Johnston

Many investors lose their money and this is mainly because they are not prepared to put the time into their trading activities. Trading and investing is like any other business, what you get out of it is relative to what you put into it. In other businesses you find a market, you learn a skill, and then develop that skill until it is better than other people in the same business. Trading is the same - it is a business - and if you want to be one of the financially secure you will have to work at it. In conventional business you have to be focused, disciplined, committed, hard working, forceful, and in control. To be successful in your trading business you can't be forceful or control the market, all you can do is identify what is happening and go with it to profit.

You can't rely on tips or one lucky trade to secure your future; you have to continuously work at it until you have developed a trading strategy. Once you have a strategy that works for you don't keep messing around with it. I have read in other articles that you should keep searching for different indicators and systems to improve your trading. Successful traders know the main part of their trading business is the development of their trading skills not continually looking for the 'Holy Grail'. When you have a set of trading rules that suit you, and the skills to implement them, you take the stress and anxiety out of trading and it will become enjoyable. Then you can create a dynamic business that will help secure your financial future.

Investing or Trading is a Probability Game

Investing is a probability game and nothing is certain. It doesn't matter how much supporting information you have for your trading decision, it is still just a probability. If it was possible for absolute certainty of an up move, then there would only be buyers (and no sellers) in the market and no trade could take place. Once you realize this, then it is easier to accept your losing trades without going through the emotions of accepting that the trade was wrong and you must get out of it.

Successful traders know that they have to identify a probable trend direction with an acceptable risk. Once this is determined, they take the trade using sound money management to protect their capital.

Risk management and money management are vital in trading to protect your capital and stop the stress that arises from the uncertain outcome of a trade. If you don't have good money management then this stress will affect your decision making. When you accept that trading is a probability game and you manage your risk, then trading becomes profitable and enjoyable.

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