1. 10,000 hours
In his recent book Outliers: The Story of Success, Malcolm Gladwell describes the 10,000-Hour Rule, claiming that the key to success in any cognitively complex field is, to a large extent, a matter of practicing a specific task for a total of around 10,000 hours. 10,000 hours equates to around 4hrs a day for 10 years. For some reason most people that 'try their hand' at trading view it as a get rich quick scheme. That in a very short space of time, they will be able to turn $500 into $1 million! It is precisely this mindset that has resulted in the current economic mess, a bunch of 20-somethings being handed the red phone for financial weapons of mass destruction. The greatest traders understand that trading much like being a doctor, engineer or any other focused and technical endeavor requires time to develop and hone the skill set. Now you wouldn't see a doctor performing open heart surgery after 3 months on a surgery simulator. Why would trading as a technical undertaking require less time?
Trading success, comes from screen time and experience, you have to put the hours in!
2. Education, education, education.
The old cliche touted by politicians when they can't think of anything clever to say to their audience. The importance of education to success in trading cannot be placed on a high enough pedestal. You have to learn to earn, the best traders work obsessively to refine their edge further to stay ahead of the curve.
3. Think for yourself.
"NO! NO! NO!"... "Bear Stearns is not in trouble"..."Don't move your money from Bear! That's just silly! Don't be silly!"
A quote from well known stock guru Jim Cramer aired on CNBC days before Bear Stearns lost 90% of its value. Many followed this call and felt the obvious pain as a result. As the old saying goes, too many cooks spoil the broth; it is very much the same in trading. Successful traders blinker themselves from the opinions of others; they focus on their own analysis of fundamental and technical information.
4. Adapt or Die.
Market conditions change and technology advances, thus the conditions for trading are always evolving, the rise in mechanical trading is testament to that. The very best traders through a process of education and adaptation are constantly staying ahead of the curve and creating ever new and ingenious methods to profit from the markets evolution.
5. Fail to plan, you plan to fail.
The best traders have a well documented plan; they know exactly what they are looking for and follow that plan to the letter. Their preparation for a trade starts long before the market open, it is this meticulous planning and importantly adherence to that plan that helps them avoid the biggest demons for any trader, over trading and revenge trading.
6. "Be like Machine"
As human beings emotions pay a key role in our existence, for a trader emotions can be a source of great pain. Trading psychology and the management of your emotions in a trade play a key role in overall success. Fear and greed can cut your winners short and let your losers run. Dealing with emotions follows on from your plan; the more robust your plan the less likely you are to fall into the emotional mine field.
7. Know your tools
Every trader has a set of tools they use, DOM, Charts, News feeds etc. These tools are a trader's bread and butter; they are the most vital part of a trader's arsenal, without which it would be impossible to trade. The best traders have mastered their order entry methodology, they know all about the features they need from their charts. This mastery of their tools, allows the trader to get the very best out of the resources they have available to them and ensures perfect execution of their trading ideas.
8. Know Thyself
Behind all the egos and excess, the best traders know their limitations; they focus on what can go wrong in a trade, and expend a lot of energy in limiting and controlling their risk before thinking about profits. They have a heightened sense of self-awareness and focus on incremental self improvement.
9. Profit & Loss
The best traders focus on the trade itself rather than the P&L; they view each trade as a technical exercise and focus on getting the most out of the market in accordance with their plan. They do not think in terms grocery payment, the electric bill and the desire to make X amount to cover a mortgage payment. Focusing on the money behind a trade can cloud technical objectivity.
In Conclusion
The greatest traders work hard to get ahead and even harder to stay ahead. Through increased and niche knowledge they constantly adapt with the market and remain profitable in every environment. Drive, tenacity and the will to succeed is the greatest edge of every successful trader.
10 STEPS TO GET RICH FROM STOCK MARKET
Posted by WOLF at 9:40 PM 0 comments
If you are a keen observer of the trends in the financial markets and the history of large scale success and failures of it, there is no way you won’t know the legend that Warren Buffet is today. The richest man in the world, he started buying stocks in Berkshire Hathaway when it cost around $ 7.50 and is the chairman of the company today, with one share of this company’s class-A stock coming close to $ 119, 000. Alice Schroeder, a writer, recently interviewed this most successful man of our times. Listed below are the ten ways or tips for get rich frm share market... dat i feel dis is essential for success so dive in and get rich more quickly:
1. RE INVEST YOUR PROFITS
Don’t spend, just re-invest! This is Buffet’s motto in life. Early on in his life, Warren Buffet started ‘reinvesting’ with the little money he made in high school and step by step, venture after venture, he built enough capital to start buying.
2. Be Willing to be Different
A key to success is to do and do well what not everyone is doing. Buffet started collecting cash for these stock market investments from mid-1950’s and looked out for under-valued investment that didn’t attract as much attention as other high-value investments. However, this successful and carefully planned gamble played off and these investments ended up beating the market average by vast margins.
3. NEVER SUCK YOUR THUMB
This is what Warren buffet calls procrastinating. He says that success comes not from thinking over things repeatedly; you should make quick decisions and not take so much time that you let the opportunity pass you by. Buffet makes his decision on the spot; when an offer comes to him he asks to be sent the price of the investment and gives his final word without losing anymore time.
4. SPELL OUT THE DEAL BEFORE YOU START
It is very important, to use the legend’s words, to make clear what you expect from the deal and what you have to offer right at the start. It is right at the start of the deal that you have the most leverage to get the most out of it. Don’t get yourself into a deal and set what you want out of it at ‘negotiable’.
5. WATCH SMALL EXPENSES
Save on little things as much as you can. Warren Buffet has been known for investing in businesses whose managers watch even the smallest expenses. It is with little things that you pave the way for greater management and it is, hence, very important to monitor the smallest of details in a business.
6. LIMIT WHAT YOU BORROW
Warren Buffet realized the importance of this much before the economic recession taught it the hard way to people all across the world. Too much debt is never good for any venture. His personal experiences and those narrated to him have taught him that it is better to negotiate with your creditors, pay off what you owe them and then save enough to have back-up options.
7. BE PERSISTENT
With great persistence, and ingenuity comes great success, Buffet feels. His embodiment of this principle is apparent in his acquisition of Nebraska Furniture Mart whose owner turned it from a pawnshop to the largest furniture shop in North America through persistence in underselling the big giants.
8. KNOW WHEN TO QUIT
From his experience of losing all his weeks earning in betting on horses, Buffet learnt that even the risks you take have to be well-planned. As important as it is to take initiative, it is even more important to know when to stop and what risks not to take.
9. ASSESS THE RISKS
Stand outside the circle of the situation, assess the best and the worst-case scenarios and then act accordingly. This advice he gave to his son as well when the owner of his company was charged by FBI for price-fixing and he had to make the tough decision about whether it would be potentially beneficial to stay with the company.
10. KNOW WHAT SUCCESS REALLY MEANS
Success is a relative term; do not define it on the lines of what others think success is but on the basis of what success means to you. Success may not be an entirely monetary concept; you should judge success relative to what satisfies you. For Buffet, it doesn’t mean more money or hospital wings named after him but linking himself to charities in an anonymous manner. This is what being successful means to him at the end of the day.
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