Despite what you see in the movies and flashy ads online, only about 10% of traders are successful. The good news is the other 90% tend to make a lot of the same mistakes—and you can avoid many of their pitfalls if you take some straightforward, concrete steps. Here are three ways to improve your trading success.
Never Stop Learning
Many traders spend some months—or even years—learning how to trade. Then they stop. It doesn’t matter how much you know; you can always learn more. The world of trading consists of interconnected principles and techniques. Therefore, learning about what moves the markets or individual stocks helps you understand the bigger trading picture. One of the most powerful ways to improve your success is to seek knowledge about new trading techniques.
Don’t Just Diversify Your Portfolio—Diversify Your Strategy
While there are several ways to profit from the market, most traders focus on only one or two. Learning new methods, such as swing trading, gap trading, and others, can be like adding tools to a toolbox. It never hurts to have more options. To seek out, learn about, and apply new trading methods takes time, focus, and some humility, but when you increase the tools in your trading toolbox, your chances of success increase as well.
Use Technology to Your Advantage
While most people know about trading online, some are hesitant to take advantage of all the tools technology makes available. Here are some basic technological tools available to most traders:
- Algorithmic trading. While you may not have the computational power to do it yourself, you could consider devoting a portion of your capital to a firm that uses algorithmic trading techniques.
- Technical analysis. Not only does price action tend to follow certain patterns, traders—both retail and institutional—believe they do. Because they believe in the price action predicted by technical analysis, the tools end up being self-fulfilling prophecies. As a result, technical analysis often affects price action as much as, or more than, fundamental factors like geopolitical events or the news.
- Automated news updates. The best way to use news updates, which can be regularly fed to your phone, device, or laptop screen, isn’t to place trades; it’s to watch how they affect price action. After a while, you may start to see patterns. Learning these patterns can help you place more winning trades.
Control Your Emotions
If you lose your cool, you’ll probably lose money, too. Don’t over-celebrate wins or dismay over losses. Take some time to analyze why a strategy worked or didn’t. Keep a trading journal and continually review it.
When you take a loss, get up from your computer, and go for a walk or run. Let the emotions subside before making a decision. You can’t “win back” money. The best thing you can do is reboot and resume trading with a fresh perspective.
Continually educating yourself, using technology to gain an edge, and controlling your emotions can help you join the 10% of traders who succeed. With careful research and a cool head, you can improve your trading success and make some nice profits along the way.