After running the ART OF TRADING service for over 3 years now and having the pleasure of working with Experienced/seasoned traders as well as amateur/newbee traders and traders of walks of life pretty much.
I feel humbled to have had the pleasure of working with so many folks and have built lasting relationships with so many!
The ONE thing i notice over and over again that SEPARATES the seasoned traders from the "amateur" traders. the ABSOLUTE ONE THING is DISCIPLINE!
Seasoned traders have a PLAN and THEY STICK TO IT, no matter WHAT. Rookie, amateur traders generally DO NOT have any sort of plans and usually take trades on whims, emotions and god knows what else! Seasoned traders ALWAYS know where the STOP LOSSES are and how big a position to take in case the trade FLOPS COMPLETELY. They have an EMERGENCY EXIT planned and mapped out AHEAD OF TIME.
For illustration purposes: The seasoned trader will call him "SammyWise" and the newbee trader we'll call him "CockyNate"
"SammyWise": Is not in the trade for the "HOME RUN QUICK EASY BUCK". He knows the key to successful trading is CONSISTENCY not "big swinging home run" trading strategies. He treated TRADING AS A BUSINESS. It's a serious business!
"CockyNate" : "Trades on margin cause he wants to score the BIG BUCKS on every trade! trading is a game of thrills! For "CockyNate" trading is a means to feed his addiction for the THRILL, like a VEGAS TABLE HIGH! He will either make $5,000 or lose $8,000. He isn't really sure but he is addicted to the drama, the thrill! He can't get enough UNTIL he of course gets washed completely.
"SammyWise": Sleeps rather well at night.
"CockyNate": is normally up all night looking at stock index futures and second guessing his positions, praying the stock indexes open in his favor the next day and can't help it but to wake up every hour to check and double check the index futures are not going to open down 2% on the open! Chances are very high he probably been drinks a six pack of beer a night.
The next morning, "CockyNate" wakes up feeling groggy because he had some very crappy sleep, he has bags under his eyes and chances are he's hung over and having a few beers to "help ease the over night tension". Surprise!! Market gaps downs 2% and "CockyNate" went home fully margined and is now in a state of PANIC!!! His heart has dropped to the ground and is sweating bullets and pacing back and worth around the room like caged LION about to attack someone for HIS losses.
Ladies and gentlemen meet the real life "CockyNate" : here is ! http://www.youtube.com/
"SammyWise": was smart enough to weigh the RISK/REWARDS on holding positions over night and thru many painful lessons learned to rarely go home FULLY LOADED WITH POSITIONS. He also has a plan in place JUST IN CASE things do not work out in his favor. i.e. Stop loss orders, SMALLER position sizes that will NOT "KNOCK HIM OUT" of the game if he woke up in the morning to see a big gap down. He is not going to panic. He's under control. He is able to rationally think his way out of trouble even if it means, cutting the trades for losses in order to PROTECT HIS CAPITAL! He knows his capital is HIS LIFE BLOOD, HE cherishes it and takes care of it like a newborn child because without he is NOTHING.
The irony in all this is SammyWise was at some point very similar to CockyNate so he can relate to him and he does feel his pain in some ways. But after being humbled by mother market a few times, tweaking and re-tweaking, learning and re-learning. He slowly but surely turned into SammyWise . He has some battle wounds on him but he is a more confident, much more disciplined trader with a PLAN for EACH DAY and EACH TRADE.
That concludes PART 1 of the Adventures of SammyWise and CockyNate !
hope you find this educational! All feedback welcomed!
Thanks for reading