Stock Market, and The 6 Commandments for Successful Traders

Stock market and forex trading can be considered as a profession, and like any other profession out there, you must first learn. To many retail traders, beginners believe that opening a trading account and read some basic information regarding financial markets is the keys of the success.

Unfortunately, it’s not! It never was or will be that easy to become a successful trader. Setting unrealistic goals and trusting the wrong broker or trading methods usually leads to failure especially for beginners.

Stock Market trading and The 6 Commandments

stock market

The First Commandment: EDUCATION!

Education is from begging of times the part of our evolution, making us differentiate bad from wrong among many other ethic decisions. Getting an education, in some cases comes for granted even if the individual receiving it doesn’t want it. While on other cases other individuals want the education but can’t get it due to financial restraints. For decades now, a vast majority decided to educate themselves in many professions and some of this majority started to look into forex and stock market trading.

Education for Forex & stock markets can be found nowadays everywhere and it comes in many forms. Beginner traders have struggled to assimilate information about forex and stock market trading and most of them either gave up or failed. The reason was not that of determination but because of the lack of guidance.

Even when the education was passed down for generations, there was someone who always guides the aspirants in how to utilize the information. Acquiring educational material regarding stock market trading can be done over the internet. What information do we need in order to become successful traders? The answer is elementary: be aware of the risks, returns, brokers and market awareness.

With all the information at your fingertips, assuming that you are knowledgeable and understand how to navigate the markets there is the UNKNOWN factor. You decide to open a trade and you’re 65% sure that it will be successful. The trade goes indeed your way but the UNKNOWN factor kicks in.

For the sake of this argument, let’s define UNKNOWN:

“Geo-Political Tensions and Natural Disasters are the big unknowns. Think about it for a minute. You’re sitting down, enjoying your evening watching your trade doing well and Trump decides to bomb Iran. Assuming again that you are buying dollars and that tweet or press release happens. What do you think will happen to the dollar?

You don’t know but you see that the trade you took and was doing well has reversed and now you’re losing. How can you predict such events to ensure your success? Well, you can’t and that is one of the reasons that nothing in life is 100% sure. However, that is not stopping us to take necessary risks. We will still wake up and drive to work even though on the way there anything can happen.

The Second Commandment: Psychology!

stock market

In stock market trading Psychology is a MUST! Think about how to coop with the feeling of losing a trade or more. Be prepared to lose some money, since stock market trading can involve losing all your capital. Losing one or more trades pushes beginner traders to the edge closing down positions and repeating the same mistakes. While as part of education may involve some losing trades the best we can do is to get over it FAST and make sure we UNDERSTAND why we made that mistake in order not to repeat it.

No one wants to lose money and it’s quite easy for some traders that fall into depression. Before they realize, after a losing streak most tend to doubt the direction of the trades. Some will close trades when breaking even while others will close trades for small profits.

Forge your willpower and stay composed while trading otherwise there is no future for you in this profession. The stronger your mind becomes, the more success in trading you will have.

Positive thoughts will lead to positive results and vice versa. Remember when you were a kid and you fell down from your bicycle or skateboard. Did that stop you riding them? or it forged you in not fearing the future falls.

An old saying goes like: “Why do we fall? So we can learn how to pick our self up!”

There is no special Mantra in stock market trading that will help you get over losses fast. But step by step, little by little you will eventually get there. I’m sure some of my readers are smiling reading this part because they were there. myself included. Making mistakes are human nature and making controlled mistakes are two separate things.

Never, ever fall into revenge trading is the worse place to be. Did you lose a trade or two? close down your computer take a couple of days off from trading, you’re not losing anything by doing that and still keep your sanity!

Sometimes you have to give yourself time and pep talk. Like: ” Hello, YOU’RE A BADASS, don’t be sad, YOU’VE GOT THIS!!!

The Third Commandment: Market Awareness!

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While some might argue that this Commandment should be under education, its Wrong! Education alone will hone your stock market trading skills while market awareness will provide opportunities.

Education is “Fire” and Market Awareness is “Wood”, to maintain the fire you need wood. Some experienced traders tend to become less alert when trading because they have the skills and psychology but can’t be bothered on following the market trends.

Slacking during stock market trading sessions can cost some experience traders their accounts. Bad habits can come into play even for the most skilled traders disregarding the importance of market awareness. We have to remember that we got all this way thru hard work and our goal is to make money. If we achieved that goal, perhaps we need to move one and stop trading.

But I can Loudly Shout: “No matter how much you made, it is never enough”.

Greed is in all of us part of our human nature and we learned hot to control it. The stock market and forex trading, for some, is a passion while for others is a must! Whatever the case may be we got to this point might as well make the most of it. One of my friends once told me: “Make as much as you can and as fast as you can”. That was back in the day when I got involved with the stock market and trading doing analysis on demand.

Full-time traders will agree with me that no matter how educated and skilled you are without opportunists there’s nothing to achieve besides some small profits. But for some that might be enough. A profit is something, and something is better than nothing. I will like to believe that you can trade once a week and achieve more than trading daily.

Less stress more profits, and most importantly more free time.

Timing is essential and being aware of market movements will give you the opportunity you need. That’s it! Only one trade that can give you the well deserved free time. Will like to quote from Lord of The Rings: “One trade to rule ’em all”. As silly it might sound, its true.

The Fourth Commandment: Investment!

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Not much to comment here since investments are different depending on individuals. Of course, a healthy investment can generate healthy returns. Realistically speaking, investing in the stock market and trading involves both time and money.

The equation between both will dictate the outcome of your returns that can start from 5% to 45% even higher. Assuming that you have one hour free daily, will create some restrictions in respects of The Third Commandment.

This restriction will lead to a slower passe of generating returns on your investment. Stock market trading became over the years very easy in terms of “the time needed to trade”. Tools and platforms can be provided by brokerage houses to enhance clients trading experience, more on that later.

One golden rule to follow The Fourth Commandment is to never invest more than you can afford to lose!

The Fifth Commandment: Risk and Returns!

stock market

The most important Commandment of them all! Risk and returns are strongly connected with all the previous ones. For better risk management you need education, strong psychology, market awareness and last but not least your investment. Let’s get technical for the sake of this article. One needs to calculate and evaluate stock market conditions for a higher return and lesser risk.

First of all, we will create the market conditions for a better understanding of how to manipulate risks.

Stop loss and take profit was and always will be your best friend, allowing you to minimize the risk and maximize the profits. Very good startup point for risk management in the stock market and forex trading is a 1:2 ratio.

Trading with $1000 we are targeting to make $40 and comfortably risking $20. If the trade went downhill we lost only 2% because of our stop-loss, but if the trade reaches our take profit we made 4% returns. Assuming you take two trades using the same win/loss ratio and you win only one that will still give you a 2% profit. Moreover, becoming consistent will enhance your trading skills even more.

Make daily or weekly targets for yourself and be comfortable while trading the stock market.

The Sixth Commandment: Brokerage House!

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Self-explanatory and simple, make the right decision when choosing your broker. Search for regulated brokers who can facilitate your needs in terms of leverage, spreads and swaps. Remember we are here to make money but at the same time reducing our trading cost.

The stock market “OCEAN” have predators, “SHARKS” who will try to lure you with sweet words and unheard offers. But you will laugh at your first contact with them like I did because you are educated and knowledgeable. You are not here to waste time, you know what you want and you will make yourself heard by your broker.

Avoiding any misunderstandings from the get-go. You are here to make money and nothing else. For my beginner and eager to start readers all the above Commandments can be easily achieved when finding your brokerage house. The vast majority provides all you need in order to succeed. Brokers have their specializations from automatic trading to stock market account managers.

What is left to do now is for YOU to decide if any of the above have relevance for YOU.

I wish you all Happy Trading and Every Success!

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