What differentiates successful trader from and a failed trader?

What differentiates successful trader from and a failed trader?

Let’s start with Life of a new trader. Here is now a new traders life will look like.

Let’s say Shiva, the really new trader, has been long on crudeoil futures for last twenty minutes now, and is up 2000 rupees on the trade. He got long because all he hears about on TV is how crude is going to the moon and because he just paid 100 rupees a litre at the pump last week. Now twenty minutes later, it goes 10 points lower and sells off a bit, and he fears the worst and sells it at the market price. By the end of the day however, it has rallied up and next day it gaps up 200 points and continue to move up with barely a down move. Not only did he never get back in, in fact he shorted it the next day, because he thought it would retrace a bit after gapping up, giving him a chance to get back in on the long side. By the end of the day 2, he’s lost 4,000 rupees on a trade that should have made him 4,000 rupees. Why? Because he never had a trading plan for the trade or a game plan for what to do with it after he got in. He took a trade at random place because he didn’t do his homework and then took a few more as he wasn’t prepared and let his emotions get the better of him. His reasons for getting into the trade were not thought out. High crude prices alone are not a good reason to buy crude. You need to thoroughly think out a trade before jumping in. And then, once in the trade, Shiva had no idea what he wanted out of it. You cannot trade this way and expect to make money. You should always have a plan for your trades if you want to make it as a trader, as trading on impulses will not get you very far.

On the other hand, a good experienced trader will make a thorough analysis of the situation before jumping in. He might take a look to see where crude oil is on a chart, considering: Is it overbought? How much risk is involved? How much can he hope to make on the trade, and so on? After meeting any criteria he may have, he will next look to time an entry if he has decided to get in. One of the things that make this trader better is that after deciding to buy, but before getting in, he will start to make an exit strategy for the trade. After getting in he will evaluate the trade on a regular basis. Basically, he would have a both a plan of attack and a defensive strategy for the trade, or more precisely he would have a game plan for the trade from start to finish

This Simple, Subtle difference is what differentiates a new trader from an experienced trader. Or you could say, it is the difference between a losing trader and a winning trader.

For more details and explanations, watch the video: