Your Questions About Successful Traders Make

Mark asks…

What book is a must read for an aspiring forex trader?

I’d like to know what books you would recommend to someone who would like to make it in the forex business. I’d love to learn from experienced traders talking about their struggles in this very tough market.

John answers:

There is not one book that will make you successful trader!
Only your personal experience, talent and self-control!

Helen asks…

Is their a diffrence between a stock trader and a investor?

I thought a stock trader only invest’s in stocks, and a investor invest in a variety of investments?

John answers:

The way to distinguish between traders and investors is the way each participates in the market (which could be anything from stocks, bonds, real estate, anything).

Traders are constantly trading, meaning they are always chasing after trends in the market, moving in and out frequently from ownership in many different investments. Trading requires full time attention and each trader competes with the huge Wall Street firms like meryl lynch, goldman sachs, and Morgan stanley to try to get a one up on the market, whether it is going up or down.

Investors take a long term approach. Investors look at the rate of return being offered by certain investments and then carefully weigh those returns with the investment’s risk. This is a calm, leisurely activity that can take some time.

Historically investors have been more successful than traders in making serious money. Famous investors include Warren Buffet, Ben Graham, Peter Lynch and other business people including Andrew Carnegie, Bill Gates, and John Rockefeller.

Whatever style you choose is what you are.

Donald asks…

What are the skills, characteristics, attributes and talents required to be a good trader( equity trader)?

Traders seem to be special breed undergoing a stressful work regimen. I am interested to know what sets apart a good trader from the rest and what are the various skills and behavioral patterns to acquire?

John answers:

Yes, indeed, trading is stressful, so that would exclude most emotional people, particularly most women. Yet one of the most successful traders alive today is Linda Bradford Raschke. From her website at the LBR Group, she quotes:

“Those who have knowledge don’t predict. Those who predict don’t have knowledge.” Lao Tzu, 6th century BC

The quickest way to become successful is to model successful people, like Warren Buffet. They have been humbled so many times, they are almost without ego. These people are extremely honest and very specific. They tend to value virtue. Nearly all discussions with emphasis on improvement captures work ethic somewhere in the discourse.

There can be no great success in trading (life) without great commitment, hard work, discipline, and the realization of the “right” type of thinking.

One of the most important Samurai texts ever written, by Miyamoto Musashi, “The Book of the Five Rings (1643)”, offers this advice: “Think of what is right and true. Learn to see everything accurately. Become aware of what is not obvious. Be careful even in small matters. Do not do anything useless.”

Part of being a winning trader is constantly developing new methods, constantly improving, constantly learning and becoming more humble and forgiving, and constantly aware of and managing our fear and greed. A winning trader is open minded and constantly aware of these changes, rather than closed-minded saying “nothing works.”

“Under pressure, emotions determine our action.” (p. 72) — from Justin Mamis’ The Nature of Risk: Stock Market Survival and the Meaning of Life.
“Because risk is typically defined as a peril, fear is one of the primary emotions. “Fear is long-term, an underlying pervasive emotion, like the underlying primary trend of a bear market. It doesn’t go away until it changes.”

There are hundreds, if not thousands of setups and triggers (indicators/trading systems), so pick one. But concentrate fully (the most important part of success-fully) on sound trading strategies. This is the hardest part, because it generally goes against human emotion. This is why most traders fail — think about it — we all have access to the same 1,000 different trading systems and same data and information. Only a few can overcome the psychological barriers preventing them from being consistent.

Some say that psychology is 50% of trading. I would guess more. The markets weeds out people who are unable to be honest with themselves. Trading is one of the most self-revelatory things that a person can do. Day in and day out you’re confronted with all your primal emotions.

Many traders react to uncertainty by hoping it would just go away. They fruitlessly try to deny the implications of change. But change is commonplace in trading, and it’s vital that you accept change and think of creative ways to deal with it. You must learn to accept the market on its own terms; hope must go out the window. After a trade is put on, it will do what it will do, and no amount of hope or fear will change it. Without a firm commitment to this psychology, if you chase your tail in worry, the markets will eat you alive.

In most jobs you can be dishonest or not, diligent and responsible or not, and slide by without knowing much or doing much. Trading will depend on your diligence and honesty with yourself, and your ability to change.

Those with a need to control things, like lawyers and doctors, generally make the worst traders. Engineers on the other hand, already possess the necessary skill sets with numbers and problem solving and specifics and exactness, and are ready to take responsibility if their bridge falls down. Engineers thrive on change.

Obviously, we are not all cut out to be epic painters or musicians or engineers or doctors or traders. Starting with the false belief that anyone can be a good trader would be like trying to train a duck into being a good runner. No matter how much he learns, how hard he trains, or even how experienced he becomes at running, he can only become a mediocre runner at best, and will probably complain constantly about the long hours and how bad his feet hurt.

Charles asks…

How much on an average has a day trader made per day ?

I mean in percentage of money invested per trade for stocks with day trading ? How many day traders do you know who have succeeded at day trading ?

John answers:

There are no records maintained that track day traders, and not all day traders are the same. They differ in the markets they work, the types of securities they trade, the amount of capital they use and the amount of time they spend in day trading.

Traders are successful in making money on least 25% of there activity, but one thing you learn as a trader is that making money in only one factor, the most important factor is to protect what you have.

All the traders I know have been very successful and I’ve been in the business for 40+ years.

Richard asks…

What is the best way for me to become a trader?

I am a 15 year old male and am currently predicted B’s in maths and physics, with this in mind, what is the best way for me to become a trader?

John answers:

To be a trader you must first learn how to invest. You must know the products and the markets in which they trade and more importantly you must know the rules that govern those products and markets. You should start by reading “Investing for Dummies” by Eric Tyson.

Then here’s a list of books you should consider, at least read half of them
Bulls Make Money, Bears Make Money, Pigs Get Slaughtered, by Gallea
How to Trade in Stocks, Jesse Livermore
Millionaire Traders, Lein & Schlosberg
One Up on Wall Street by Peter Lynch
Reminiscences of a Stock Operator, Edwin Lefevre
The Disciplined Trader, Mark Douglas
Trader Vic-Methods of a Wall Street Master, Victor Sperandeo
Trader Vic II-Principles of Professional Speculation, Victor Sperandeo
Trading for a Living, by Alexander Elder
Trading in the Zone, Mark Douglas

And when you think you want to trade, try some paper trading to test your skills without spending you money

Before you enter your first order you need to address four major policies and have very strong discipline to follow them
1 – You need a written sound trading/investment plan with rules that will not only help you but more importantly protect you, mostly from yourself. Always use stops either to protect you on the down side or to lock in profits on the up side. Never trade on emotions, when emotions get involved walk away. Don’t try to out-smart the market, you’ll loose but if you always take what the market is willing to give you, you’ll be successful. Other words, you don’t trade against the trend since the market is always right. And NEVER trade on emotions, once you let emotions in your trades you will loose
2 – A written money management program is essential. Remember never invest 100% of your capital into any one security and never have 100% of your capital invested. Never go into a trade without knowing when and where you are going to get out of it. Never let a loss on a trade get greater than 8%-10%, always take you loss and walk away – don’t loose more than you need to and don’t be afraid to take the loss. Remember you never can get hurt taking a profit. Never average down, but you can average up.
3 – You must have sufficient trading/investment capital. Use your own money, there’s no need to go into debt so that you can trade and/or invest. Margin can be used but only with restraints, never let the account wall below 45% equity. Unless you fully understand margins you should not use it.
4 – A full and complete understanding of the rules & regulations of the industry. If your going to play in the game be sure you know the rules of the game and always follow them.

Unless you are willing to study and follow the above you will never make it as a trader. To be successful as a trader will take work and constant study of the markets and the products traded in those markets, there is no easy way.

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