AT THE CLOSE
The 10 Pillars Of Trading
by Sam Baum
Over the years that I've been coaching traders, I have found a lot of common ground between novices and professionals. What I'd like to do is explore the main characteristics that separate novices from professionals. There is a gap that needs to be filled if you want to cross the line over to the elite club of the 10 percentile, a club of successful trading professionals who consistently produce profits on a weekly basis.
THE 10 PILLARS
What I came up with are the 10 pillars for success. If implemented correctly, there is no doubt that any trader can succeed and become consistent and profitable. The pillars are:
1. Treat trading like a business. I know that a lot of you are probably saying to yourself, "Of course I treat it like a business. Why wouldn't I?" Think about it for a second. Why did you start trading in the first place? For a lot of people, the main reason is the lifestyle that trading can provide. Others believe - incorrectly - that trading is an easy way to make a living. Although being a trader does not require a college degree, you still need to continuously educate yourself.
If you compare trading to any other profession, you will find a lot of similarities as well as differences, but let's concentrate on the similarities. Trading can be a lucrative business. If done correctly, the sky is the limit. The amount of money you can pull out of the market is only limited to the size of your trades - that is, the number of contracts or shares. In that respect, trading can be compared to any other profession or business. If you take your hard-earned money and invest it into a startup or a small business, you would give it all your effort, passion, and energy to make sure that business succeeds. But many novice traders tend to not treat it that way.
Good management is a characteristic of a profitable company. Similarly, in order to have a successful trading business, you need to manage it well. You have to have a good business plan. When I ask struggling traders what their plans are or what they are trying to accomplish out of their trading careers, I often get answers that involve a certain point count or profit per day. This is not a business plan. A good business plan has to first set a vision, something you have to strive to reach.
Once you set your vision, you need to define the methods and course of actions necessary to accomplish the vision. This you do through goal settings and well-defined steps that need to be taken. A trader needs to decide what kind of strategy to implement under certain market conditions, and at what times, and so forth. You need to create a plan. After all, one of the main reasons a business fails within its first two years in business is poor planning.
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Originally published in the October 2008 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2008, Technical Analysis, Inc.