After talking and corresponding with hundreds of traders global macro and otherwise over the last several years here are a few things that they learned the hard way. A few of the rules may sound cliche but they are the truth and they are time tested principles of successful trading.
Risk Management is Key: Many people have yet to learn that if you don't focus on risk then risk will focus on you. You may think that you are fine just picking good stocks, options, or whatever trading instrument you use. The truth is that if you are only looking at your entry then you are missing the boat. Once you see a potential opportunity you must analyze it and find the potential risks. Once you know your downside you can better determine other variables such as how big a position you can put on and if you should put it on at all. We have all heard that we need to let our winner runs and cut our losers short. If you have heard it but haven't been following it then it is time to change your ways.
Process vs Outcome: Another thing that many traders fail to realize is that your trading process is far more important than any one outcome. If you bought the Brazil Bovespa stock index and it went down then how does it affect your trade in US Junk Bonds? It shouldn't affect it at all. Yet time and time again traders let it get to them mentally and then it messes with their results. That of course means they lose money. Realize that the markets don't care about you. So focus on your trading process and not on individual outcomes.
Understand Opportunity Cost: In order to apply this to your trading you have to first look at what it means. Opportunity cost is what you are missing out on by making a choice. If you are in XYZ and you have no more capital then you may be missing the potential to make five times in ABC. Make sure that you are weighing the risks and the rewards before making a trade.
Learn To Use Research: Many people hesitate at paying for research and yet they have consistently bad trading ideas. If you are reaching your profitability goals on a consistent basis then good for you. If however you are like most traders and want more then maybe it is worthwhile to invest in some infrastructure and outside research. Try out several different services and find some that fill the gaps in your research. Most good traders subscribe to 3-5 different newsletters and a 1-3 different software products. Subscribing and then learning how to use these tools can give you an endless stream of solid and actionable trading ideas.
Read, Read, and Read Some More: Trading is an ongoing pursuit and most of the best global macro traders never stop their education. If you need to learn more about economics then buy a book or take a class. If you want to know more about earnings then read a book, take an accounting class, etc. Bad at reading charts? Join the MTA and look at some technical analysis books. Basically fill in the voids that you have in knowledge.
Well Being: A lot of traders underestimate the value of having good health. Study after study prove that the better your body is, the better your mind can function. Of course the better your mind functions the better you will be at trading and you will make more money.
By reading and doing the steps that were outlined for you, your trading should improve considerably. By looking at risk, research, learning more, etc. You should be in a better position to find the better trades and make more money. - 16463
Risk Management is Key: Many people have yet to learn that if you don't focus on risk then risk will focus on you. You may think that you are fine just picking good stocks, options, or whatever trading instrument you use. The truth is that if you are only looking at your entry then you are missing the boat. Once you see a potential opportunity you must analyze it and find the potential risks. Once you know your downside you can better determine other variables such as how big a position you can put on and if you should put it on at all. We have all heard that we need to let our winner runs and cut our losers short. If you have heard it but haven't been following it then it is time to change your ways.
Process vs Outcome: Another thing that many traders fail to realize is that your trading process is far more important than any one outcome. If you bought the Brazil Bovespa stock index and it went down then how does it affect your trade in US Junk Bonds? It shouldn't affect it at all. Yet time and time again traders let it get to them mentally and then it messes with their results. That of course means they lose money. Realize that the markets don't care about you. So focus on your trading process and not on individual outcomes.
Understand Opportunity Cost: In order to apply this to your trading you have to first look at what it means. Opportunity cost is what you are missing out on by making a choice. If you are in XYZ and you have no more capital then you may be missing the potential to make five times in ABC. Make sure that you are weighing the risks and the rewards before making a trade.
Learn To Use Research: Many people hesitate at paying for research and yet they have consistently bad trading ideas. If you are reaching your profitability goals on a consistent basis then good for you. If however you are like most traders and want more then maybe it is worthwhile to invest in some infrastructure and outside research. Try out several different services and find some that fill the gaps in your research. Most good traders subscribe to 3-5 different newsletters and a 1-3 different software products. Subscribing and then learning how to use these tools can give you an endless stream of solid and actionable trading ideas.
Read, Read, and Read Some More: Trading is an ongoing pursuit and most of the best global macro traders never stop their education. If you need to learn more about economics then buy a book or take a class. If you want to know more about earnings then read a book, take an accounting class, etc. Bad at reading charts? Join the MTA and look at some technical analysis books. Basically fill in the voids that you have in knowledge.
Well Being: A lot of traders underestimate the value of having good health. Study after study prove that the better your body is, the better your mind can function. Of course the better your mind functions the better you will be at trading and you will make more money.
By reading and doing the steps that were outlined for you, your trading should improve considerably. By looking at risk, research, learning more, etc. You should be in a better position to find the better trades and make more money. - 16463
About the Author:
Jeff works at TheMacroTrader.com Which publishes a weekly newsletter on macro trading using ETF's. TheMacroTrader newsletter Is for investors and traders that are looking for actionable global trading ideas.
