Ultimate Trading System

By: vanSetiawan

If you do not know to trade, that does not mean that you are not smart.
On the contrary, there are many highly intelligent people who lose millions of dollars in the market.

Lesson 1 : Define Why You Want to Become a Trader
Ask yourself - Why do you want to become a trader?

Close your eyes and visualize what being a successful trader means to you; see yourself making trades and trading profitably. Feel the great and relaxed feelings of having extra money in your bank account. This visualization exercise will help you formulate a solid, worthy, personal goal and keep you motivated and focused through this article.

Your first assignment is to write out one primary goal for your trading plan!
Take that goal and write it on a 3 x 5 card and put it where you will see it when you wake up in the morning and before you go to sleep each night. If you really want to burn this goal into your subconscious mind you should read it aloud once each morning and evening.

This technique really works. It is not "corny". This is a key technique Napoleon Hill teaches in "Think and Grow Rich"; the class success book teaches how to turn your thoughts into riches.

Lesson 2 : What Separates Good Traders from the Bad Ones?
The difference lies within your psychology. Your psychological mindset is likely to play a larger role in your trading career than your chosen technique or any other details associated with your day-to-day practice.

In short, your psychology refers to your emotional responses to a given situation...In trading, fear, greed, vanity, pride, hope, jealousy, denial - all these can affect investment decisions. Although your aim in the market is to maximize your profit and minimize your risk, emotions often make this easier said than done. For example, traders who react emotionally, make the wrong decision - such as the common mistake of holding a losing position in the belief that someday it will become a winner.This classic mistake is called loss aversion.

Loss aversion refers to the tendency for
people to strongly prefer avoiding losses than acquiring gains. Some studies suggest that losses are as much as twice as psychologically powerful than gains. Loss aversion compels most traders to hold a losing stock while it plummets downward.

This clouded judgment clearly contradicts the trading adage "cut your losses."

The truth of the matter is, without controlling your emotions, most new traders lose all their money very quickly in the markets. In fact, most are completely wiped out within
the first year of trading. So, as you can see, your emotions do play a big part in
determining whether you fail or succeed...

How can you reduce the effects of emotion & negative psychology?
The answer is discipline - without it you will lose.
The key message about discipline is that without it you will lose. It is that simple.

Ultimately, undisciplined behavior is going to be punished by the market, either by direct losses or by the loss of profits which otherwise have been available.

Lesson 3 : Designing a Winning Trading System
This is perhaps the key section of this article : It is your trading methodology that will ultimately determine whether you win or lose in the markets.

Every successful trader has a winning system and there are as many successful systems as there are traders. The key to success is to design a system that is suited for you. Many traders fail because they do not assess how well a trading system matches their personality.

The fact is there is no perfect system. Successful investors succeed because they choose a system that they feel comfortable with, not one that claims to be the cutting edge. A cool, disciplined trader will make money with an "average" system, while a nervous, arbitrary trader will wreck a "brilliant" system.

The key is to develop a methodology that maximizes your strengths and minimizes your weaknesses. But how do you do that? Firstly, you must define your objectives.

For example, if your goal is cash flow and low risk, buying or selling at extreme levels (overbought/oversold) isn't suited to you. If your goals center on quick capital growth, high returns and high risk, then bottom picking strategies and gap trading may be your style.

Decisions such as these will have the largest impact on the style of your trading system.

With this in mind, be sure to define your trading objectives as best as you can since

your system must match your own criteria or you will never make big profits. You need to complete this simple sentence: "I am trading in the market because I want to..." complete this and you are well on your way to setting your portfolio objectives.

What Should You Trade?
With a few portfolio objectives defined, your next step is to decide what market you are going to trade in order to reach your portfolio objectives.
To select the most appropriate market, I suggest you pick a market you are familiar with or one in which you would ultimately like to trade.
The important decision is to select one market. Avoid the tendency to want to trade everything and realize that there are enough potential profits by trading just one
market. Many traders fall into the trap of thinking the more they trade, the more money they will make.

Real money is made by mastering your chosen market and understanding it is not the selection of the market that makes the money.

To Be Continued...(Source : beatforex.web44.net)

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