Day Trading Secrets – Three Trading Secrets From The Pros

| August 24, 2009 | 0 Comments

Flopping down on the couch this weekend, I started scrolling through the TV channels.  That’s when I came across a movie I’d see a few times before – The Replacements.  A perfect way to relax on a Sunday afternoon.  It’s a classic football movie about a team of misfits who rise up and become a great team.

It’s a little cliché, but a fun movie nonetheless.  There’s a scene I always remember.  The coach (played by Gene Hackman) is trying to convince his star quarterback to join the team.

He says, “Do you know what separates the winners from the losers?”

The quarterback snaps back, “The score.”

In the real world, athletic ability sets the professional player apart from the average Joe.  Basketball players run faster and jump higher.  In football, it’s strength and acceleration.  350 lb linemen run the forty yard dash in just a few seconds.

In baseball, its hand eye coordination.  Being able to see a 90 mile per hour fastball and hit it out of the park is a physical skill very few people have.

In trading, it’s a bit different.

Making money as a trader isn’t determined by genetics or physical strength.  A guy who bench presses 350 pounds has no advantage over the 90 pound weakling.

Professional traders have an advantage over day traders – and it’s not physical.

I’ve meet many different types of traders in my life, from the wide-eyed hopeful beginner to the grizzled old lifer on “the street”.  Years ago, pro traders had better technology and access to the markets.  Now with the internet, information travels freely and real-time trading can be done from home.

It’s not technology separating the pros from the Joes.

Any pro trader (if you can find one willing to talk to you) will tell you successful trading comes down to three things.  You’ll hear those same three things mentioned over and over again.  Here’s what they are…

First Professional Trading Secret

Have a plan.  I know it sounds simple, but it’s not.  Too many beginning traders are looking for the next hot market.  One minute they’re trading commodities.  Then they’re trading currencies.  Three days later they’re trading options.  They become a jack of all trades, but a master of none.

What’s worse is a constantly changing trading strategy.  It’s a problem many beginning traders have.  First they’re investing based on fundamentals.  Then they’re trading based on moving average crossovers.  Eventually they’re trading based on Japanese Candlestick charts.

You’ll never see a professional trader changing his strategy like that.

Having a plan is about being focused and disciplined.  Identify what market’s you’re going to trade and study it.  Determine your trading strategy and stick to it.  Identify entry and exit points and don’t waver. Once you have a plan, stick to the plan.

This leads to our Second Professional Trading Secret.

Always control your risk.  We’ve all read about traders losing billions in a single trade.  They crash and burn in a big way.  Those are traders who didn’t follow their risk control strategy.  Determine where your risk levels are at.  Then make sure you incorporate them into your trading plan.

Everyone has a different pain threshold.  Some don’t think twice about losing $10,000.  Others would be devastated at a loss of $100.  Once you know your level, stick to it.

You can control risk a number of ways.  Some traders hedge their positions.  Others use stop loss orders.  Still, others have tight exits they constantly monitor.  Whatever method you decide to use – use it and stick to it.  Don’t ever ignore an exit point… not once.  That’s how traders get wiped out.

Third Professional Trading Secret

The third secret goes hand in hand with secret number two.  In our second tip, we talked about controlling your risk.  By exiting a bad trade quickly, you conserve capital.  When you have a winner, it’s sometimes harder to determine your exit.  You’ve heard it time and time again… let your profits run.

It’s very easy to say… but difficult to do.

You don’t want to sell too late and give away profits.  You also don’t want to be anxious and sell too quickly leaving big profits on the table.

I’ve seen it happen before… a new trader sells a winner.  He’s happy to book a quick 30% gain… only to watch the trade move up and up and up. Remember, the small 30% winner could be the next 100%, 200% or 1,000% trade in your portfolio.  Be slow to book a winning trade.

There you have it.

These are three professional trading secrets used by the pros.  Go back and read them again.  Incorporate them into your own trading strategy and system.  I’m sure you’ll find these trading tips helpful on making more money than ever before.

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Category: Technical Analysis

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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