Stock Trading Success

The ABC's of Stock Trading Success

Stock trading success...why is it so elusive?

With all the trading information, systems, trading advice and assistance available today, the fact that most people who attempt to profit from trading Stocks lose money seems quite bizarre.

Can you imagine the millions of dollars that must have been spent by countless traders on courses and Stock analysis software, that was wasted because the buyers didn't understand the key principle of trading success I am about to share with you now.

We aren't going to need any charts for this lesson...just your ability to comprehend the value of what I am about to share with you and your willingness to take action - right now I want to share with you the ABC's of trading success.

If trading was an easy business to master and profits were freely available to all, every punter with a computer and a free charting program would be a millionaire and the streets of our cities would be clogged with chauffer driven limousines.

The fact that the majority of the population have no idea how to make a buck from the Stock Market, often after spending large amounts of money on education and trading losses, made me wonder why this is so.

I searched for the answer to profitable trading for years, until I found it in an unexpected place, when I wasn't looking for it at all.

You may be able to relate to this story, or you might just be starting out and this will help you to reduce the time you spend in your initial learning stages and speed up your path to profits.

Let me tell you about Jim (not his real name?of course). Jim first started trading after answering an ad in the Brisbane Courier Mail for a popular trading education package that cost him around $1000.

Little did he know that the fateful investment in that course would lead him into the abyss of Gann analysis, and that it would eventually cost him thousands of dollars in courses and trading losses to pull himself out the other side.

He read the course, watched the videos, read the course, watched the videos...you get the picture.

Losses, losses, small profit, losses. He felt that because of his limited knowledge, he had to learn more and more in order to stop the losses and to start profiting from the market. So he spent more and more on courses - and his trading got worse and worse.

The more he learnt, the less he seemed to know and the worse his results became. Then, he finally learnt about the A, B, C triangle of success, in trading and in every other area of life, from one of his property mentors - John Fitzgerald.

The A, B, C's stand for -

A - Awareness

B - Belief

C - Conduct

Awareness - He realised that he already did in fact know enough to become a successful trader and investor. He had studied many books and courses on trading and had everything he needed in the way of practical trading information to make a profit.

He was aware of what it took to trade profitably. He could become a good, a great trader, if he could just develop the second factor...

Belief - If he could bring himself to believe that he was a good trader, he would become a good trader.

He didn't need more knowledge at that time, because he had a firm grasp of the basics. He simply had to believe in himself and his abilities and the profits would follow.

The third leg of the success triangle

Conduct - Was were he was falling down.

He would look at a chart of a Stock or market, and decide on a trading strategy using his understanding of trends ? he was calm, detached and unemotional - just like his written trading plan told him to be.

His success rate was good at finding profitable trades - but his conduct was the problem...

He had no trouble placing the trade while the market was closed. He would simply call his Broker and give him the order.

Then, the market would open. His calm, detached, unemotional state would turn into panic.

He would feel physically sick at times, scared in case his analysis was wrong and he lost money on the trade.

He honestly believed that he couldn't afford to lose any money (the poor mans mindset) so he focused on losing.

He got what he focused on... He watched his trades like a hawk, and at the first sign of a reversal against his position, he would either call his broker and exit the trade, or move his stop loss order to a place where he was virtually guaranteed of being knocked out by the normal fluctuations of the market.

He simply had too much leverage - he was over trading.

He was continually setting himself up to fail.

His conduct was the weak link in his trading success triangle.

Because he was continually losing money on his trades, albeit only small amounts, his belief system started to falter, and he saw himself as a losing trader even more - then he started to think he had two weak sides on the success triangle ? conduct and belief.

He started to question the system he was using, which he had painstakingly back tested, over many markets on hand drawn charts and knew was solid, but his failure to have control of his conduct or belief made it look like it wasn't a good system at all.

So, how to fix it...

He sat down and looked at his recent trading results, and noticed that on most occasions, if he had stayed in the trade, he would have made a profit. His system was valid. His Awareness was enabling him to find and execute profitable trades.

His Belief system needed a gentle prod after several losing trades in a row, but because he had done so much study and work on back testing, he knew he deserved to be successful.

He started to visualise himself in his trading room, making profitable, long term trades and enjoying the benefits that this type of trading would bring to himself and his family.

Then, he worked on his conduct. He again wrote out his trading plan, and decided that he would treat his plan like a shipwrecked sailor treats a life raft.

He would cling to it until he was forced out of a trade by the actions of the market, not by his fearful, emotional response to the actions of the market.

He started placing his stop loss orders in a position so that the market had to change trend in order to take him out of a trade. In other words, a logically placed, technically correct stop loss position.

He then reduced his position size to allow for these stop loss orders being further away from the price action, so that his account was never at risk of being totally wiped out by one serious loss.

He did a pre-trade and post trade analysis sheet, so he could analyze his performance and try to consistently improve his results.

(This can be as simple as a sheet of paper where you write down your order, the position of the market and your thoughts and feelings before, during and after a trade.

Or it can be an elaborate system of checks and balances that guide you through each of your trades. Be careful though - keep it simple or you probably won't use it!)

Once he started to do this, he started to make money (with the exact system we have been teaching you on this Website).

(There are, of course, many other strategies and systems you can use in addition to the lessons we teach you to increase your profits, but to start with, these methods are all you really need to become a profitable trader.)

We are always learning and improving - every trader should strive to do this also.

When you are making consistent profits using the methods we have shared with you, investigate some of these additional entry and exit techniques, but not at the start. Keep it simple.

When he started to trade this way, he found it was far better to take a small position with a loose stop loss and be able to sleep at night, than his previous strategy of using maximum leverage and stressing out whenever he was in the market, to the point where he couldn't stand to walk away from his screen in case the position went against him.

This method sets up lots of profits and a few losses. Much better than the alternative he had previously used.

He then started looking for Stocks that trended strongly for long periods of time, and was drawn to the US Stock Market.

He used exactly the same entry and analysis techniques I have shown you on the Website, and -

He bought Call options in Gen Probe Inc (GPRO) with the Stock at $27 and held on until the Stock price was $58 three months later.

He bought Pacificare Health Systems Call options (PHS) when it was trading at $24 and held them to $51 four months later.

And he bought Sandisc Corp Call options (SNDK) with the Stock at $24 and held them to $58 less than four months later.

(Please Note - these are not Stock recommendations, they are merely mentioned here for illustration and educational purposes and the trades are hypothetical examples).

Can you imagine the change in the size of his trading account balance?

None of these Stocks had given him any reason to sell earlier, so he simply held on for the ride?Awareness, Belief, Conduct...the success triangle.

The Awareness will come when you study and really 'get' the lessons on the Website and in the Newsletter.

Study the lessons carefully, read books written by the masters. Teach others what you have learned - you will gain a better understanding yourself.

All human interaction is a chance to learn or to teach.

By teaching someone else and sharing your knowledge, you will learn any subject at a deeper level. You ultimately go from an intellectual understanding to an emotional understanding (as Robert Allen calls them, an aha!) of your chosen area of interest, in this case, profitable trading. Try it...

The Belief will come when you back test the Trading Plan I share with you on the Stocks that you want to trade and prove to yourself that it does indeed work.

Visualize yourself making a series of profitable trades. Feel how good it is to see the market moving in the direction you expected it to.

Imagine spending the profits you make trading Stocks with your family and friends, and the time you will have to do the things you want to do instead of the things you have to do. Successful trading gives you the 'time freedom' to do whatever it is that you want to do with your life. Do it first in your mind, and then do it in the market.

Your Conduct - well that's up to you. Will you 'decide' to look at your written trading plan as your life raft? Cling to it as your last defense against the emotions of fear and greed that live inside each one of us?

Will you trade with the trend, enter off 1 to 4 day reactions to the main trend, reduce your leverage or position size and put your stop loss orders out of the way, so the market has to change trend to get you?

If you do this, you should be confident that you can achieve trading success. That is our wish for you. Good luck.

Now, lets review today's lesson -

The Trading Success Triangle has as it's three sides - Awareness, Belief and Conduct

If any of these elements are weak or missing, the triangle has no strength

The sides are all important and are dependent on each other, but Conduct is the most difficult for the average trader to master

Fear and Greed act to change our conduct from what our rational thoughts tell us is the correct course of action, to actions that aren't always in our best interests. By controlling Fear and Greed, we can make rational decisions that help us to become profitable traders

I hope this lesson has helped you in understanding the mindset of a successful trader a little better.

Understanding these three critical elements of trading psychology will put you well on the way to a profitable trading career.

Get this, and your trading success is practically assured. Miss the lesson, and your chances of making big money in the Stock Market are profoundly limited.

Please feel free to share this lesson with your trading friends and associates - they will thank you for it.

To Your Trading Success,

Tony Spann and the Team

Stock Trading Review is dedicated to helping you succeed as a trader by sharing with you simple and easy to follow tips and techniques.

Discover more insider secrets and the exact proven strategies to trade stocks profitably: http://www.stocktradingreview.com

Copyright(C)2005 Stock Trading Review

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