Sunday, April 19, 2015

Key Differentiating Elements of Trading Success & Debacle

International financial markets, be it of currencies, commodities or stocks, provide investors the access to most liquid market on the planet. Thanks to the advent of cloud computing, buoyed by syndicated efforts of all market players to popularize it further and to catapult it into the trillions dollar worth arena. Given the inherited charming associated with the market, tally of fascinated participants in the marketplace augments day-after-day from all the continents as it work round-the-clock (24X5) to satiate investors’ appetite for investing.
Is the market really there to satisfy the needs of all involved? Honestly enough, it’s not. There are a lot of reasons to warrant it. Available statistics shows that around 95% of investors losing their money in the market and other 5%, the professionally seasoned segment becoming rich or ultra rich, may be gradually but surely steadily. I know it may sounds like an irony for many, But it is an undisputable fact and understandably, hard to digest.
While looking at this shocking statistics, I feel it is better to explore the differentiating factors of distinctiveness of the said seasoned traders and what does make aforesaid 95% of investors’ community as the losers? And you see the conflicting terrain of traders’ strict compliance and gross laxity, which leads to core performance differential. A glimpse on key elements shall provide the traders what they really need to be successful in this toughest domain.
Tricks of trade
Firstly, tricks of trade can not be learned overnight, it is truly a time taking process. It can be attained over the period of time with dedication and more precisely phase-by-phase through the process of rigorous seasoning. Because you, as the investor, are literally in the tough water & sailing safely through it to reach the destination of your financial goals entails more focused & dedicated approach aligned with discipline, practice & education, otherwise quality of trading with all the reasons, to be stooped down to mere gambling, though needless to say, it can be a BIG tragedy without any doubt.
Sharpened winning instinct
It is the credo not cliché -- the hard earned wisdom of any sphere hardly succumbs to any challenge -- with ease. Profound domain knowledge on what’re there to lead or lag along with well acquainted ground realities like prevailing trends are vital aspects in concluding the investment decisions in the right manner.
As far as international financial markets are concerned, there is no saturation point of learning and it is process of continuous learning with a spontaneous inner urge, especially for the people, those who are fond of charming & challenges of the market. They always manage to skip away from the dominance or toxic touch of the market.
Trading strategies & the adherence of trading rules
There is no dearth for strategies, while we search for it either on net or printed media but only problem is with their reliability. Some of the strategies are technical based, some are fundamental based and some are combined with both. With reasonable degree of efforts, traders can develop their own trading strategies and which can be re-aligned in accordance with changing macroeconomic and allied backdrops. Rules attached with the strategies should be adhered strictly especially on lot size, level of leverage, stop loss & profit limit. Trader’s laxity in adhering the trading rules potentially will make causality of damage not only to trader’s equity but also till then fine tuned balance of his personal life. Therefore, formulating right strategy, adhering the trading rules and working on for further improvements are crucial for traders’ success.
Evolution of resilient mindset
Like numerous tempting factors, there are lots of deterring factors too like frequent whipsaws & stop hit loss etc. Therefore, to surmount all these possible challenges on the way, evolution of a resilient mindset required. Here by resilient mindset, I mean a psyche entirely free from unhealthy or negative emotional traits like greed, fear & impatience etc. and it will be great to instill quality attributes like willingness to work hard with patience & dedication within. With novice traders markets hardly behave friendly, therefore excruciating experiences are more often to confront with. Transforming these experiences in our favour in coming phase of trading, will really be marvelous. Nothing there to be disillusioned while your quiver got exhausted because this is the same path more of the most successful traders walked through before making their own distinctive mark in the market.
Hitting the stops in the unexpected manner may not always due to traders’ faulty judgement or dissection of market characteristics, while taking position(s). And there is no point of blaming others on failed trades, better to learn from mistakes, always document the noted trading flaws in the trading diary and take pre-emptive measures not to occur the same mistakes again in the trading decisions. These all are traders’ strategic imperative and therefore, by doing these all transformation to next level can be attained with surprising ease.
Enhanced knowledge of market dynamics & characteristics
A well informed trader can measure the possible volatility of the markets on key data releases and will be able to make profit out of such events. Sourcing of quality inputs & effective utilization of the same will help the traders to achieve their goal(s). To enable the traders to reach-out these required materials, wide array of resource dispensing mediums like specialized blogs, websites & magazines are around us. At time they provide clairvoyant market insights & crude trading ideas -- potentially well-worth to take ahead.
Importance of efficient risk management
The word HOPE in daily life is much desirable element. As conventional wisdom most the time making big bow in the market, hanging on the position which is clearly against the trader for long time & with the hope of reversal of situation more likely to make the killing. In the market, miracles happens hardly, especially when mark-to-market value of the opened positions are negative. Therefore, no point to expect miracle to happen to bail you out and moreover at this Juncture traders’ attempts to make a smart somersault -- more likely to prove futile. But under all the circumstances, associated risk of each opened position should be restricted strictly.
There are certain unwritten but well accepted rules in the market, which are gyrated around the market. But unfortunately, many of the investors are ignorantly or conveniently neglect these all and that may be because of their innate inertia or reluctance to have required shift in their paradigm.
Leverage – A double edged sword
Taking advantage of good part of available leverage may be good only until taken positions are in traders’ favour and from the moment it turns against, there will be differently undesirable picture to see. Leverage is like double edged-sword, as it can make and break. Traders are usually taking excessive leverage than the desired/reasonable level in order to fetch-in quick or easy bucks, but traders without high degree of professional competencies are more likely to end up with greater lose. If the trader opened his position with higher level of leverage exposed to the risk of collateral damage to his equity, which can be caused by a minor negative market movement.
Practice makes people perfect
Making strides in demo account is generally not the yardstick of any trading acumen or prowess. In most the cases, players taking positions randomly to let the position(s) to take its own course and interestingly at the end of this dream-run equity (virtual) either burst or swell.
But in fact, demo accounts are not meant to be used the way most the people using it now. Demo account is the practice account, practice makes person perfect, therefore, demo accounts are meant to practice novice & experienced traders to fine tune or refine their strategies. Demo accounts are the perfect platform to build-up required trading capabilities and therefore, ultimate aim of demo account user is to make the chosen or adopted strategy a reliable one.
Mentor’s presence
Guidance of a well experienced mentor will really be a great help for beginners. It can be a nice experience of sharing the hard learned trading wisdom with the needy. Mentor’s role there is to heed the need of aspiring traders and show them the path to prosperity.
Though International Financial Markets provide level playing field for all, dealing the instruments like FOREX & CFDs sees significant degree of risk and therefore, it is advisable to do trading these instruments subject to the stringent guidance of more experienced traders, especially in the initial phase of trading career.
In nutshell, International Financial Markets provide the investors greater opportunity to diversify their investment portfolio. As it cater the needs of all segments of investors’ fraternity, each & every investors can reap the benefits, if they take the process cautiously. From the medium to long term perspective, there is the ample scope for prudent investors to counter the on-going effect of inflation by investing in international financial markets wisely

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