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Discipline is paramount if you are to become a successful trader.
Everyone can have a successful day, even a week or a month speculating
on a market but to consistently produce profits over the long term you
need to think like a trader. Below are just a few rules you may want to
consider when executing your trades.
1.) Managing your bank......don't put all your eggs in one basket
There is no right or wrong staking plan when trading but once you
have decided how much you want to deposit in your 'trading bank' limit,
you need to decide the 'maximum loss' on a single trade. Many traders
will not risk more than 5% or 10%. Also be careful not to chase your
losses. Should you have two losing trades and lose 10% (5x2) of your
bank do not double up. There may be three winning trades just around the
corner. It is not a sprint but a marathon. Wait until you have a
healthy profit before you change your rules. If you are losing, you must
be doing something wrong and therefore should not be risking more. Even
consider reducing your staking plan.
2.) Know your entry and exit.....and patience
A disciplined trader will choose his level, know his entry and
exit...and he will stick to it. If it does not hit his level he will not
make the trade. Chasing the market is a dangerous game. While it may
not seem to be the case at the time there is always another trade. A
trader is playing a percentage game that over time will deliver a profit
because he makes more correct decisions than bad ones and has the
discipline to exit losing positions as well as profitable ones. He will
understand that he is not going to get it right every time but will be
correct more times than he is wrong. His thought process may be 'I will
take this position risking £1 to make £4'...a 4/1 chance (or 25%). This
trader knows he only needs 1.01 successful trades in four under these
rules to be profitable. This is the same psychology used by a bookmaker
or casino owner. On a day to day basis they do not know if they will
make money but over time they know, providing turnover is healthy, they
will yield profits. When you have determined your levels, have
confidence in your decisions and do not hesitate when placing the trade.
Hesitancy will often leave you chasing the market and entering a trade
at a worse level.
It is important to not only determine how much you hope to take out
of the market if it is a profitable trade, but how much you would be
prepared to lose should it go against you. Most traders can do the first
part but when in a losing trade, they let it run and end up wiping out
all of their profits! Also put your exit order in immediately and DO NOT
move the goalposts! Below is a scenario which occurs if you do not do
this.
You decide to back Man Utd against Arsenal at 2.8 with a view to
trade out of it when the first goal goes in, green-booking for either a
profit or a loss. Your analysis suggests if United go 1-0 up in the
first half they would be trading at around 1.7. You do not put in your
lay order. Rooney scores in the 30th minute. They are down to 1.67 but,
having not pre-entered the order, you are mesmerized by the price
continuing to shorten. You say to yourself '1.60 and I am out', then
'1.50 and I will close my position'. You keep moving the goalposts only
for Arsenal to score and you find yourself in a losing trade. There is
no worse feeling. Good analysis but poor trading!
3.) Never expect the market to do what you want.....be happy when it does
A junior analyst for a leading global bank strode confidently into
his CEO's office and announced to him that, having analysed all his
charts, Pork Bellies were cheap and a short term futures trade; just
below $80 would yield sizeable profits in the near time. "We should buy
them when they hit $78", he said. The CEO asked him to sit down and for
two hours they monitored the market. When it hit the level, the trader
reiterated the 'gift' of a buying opportunity. "This is the short term
bottom; we need to take a position". His boss picked up the phone and
put in a large SELL order. The price continued to fall. The trader
sitting across from him went ashen. "Your technical charts may help me
on my decision making but never tell me what the market will do next".
You obviously need to have an opinion, based upon your analysis, but
never be so arrogant to believe that you will be right and that you can
predict the direction of a market. There are too many different market
forces and participants to know what will happen next - someone may be
forced to sell an open position because he has a margin call; another
may be required to hedge a large position on another product.
Many traders believe because price movement on a chart is a replica
of one they have seen before that they know where the next move is. They
may well be right but because it happened before, it is not certain to
happen again unless the market and participants are EXACTLY the same as
on its last occurrence. This is highly unlikely!
Every trader has losing trades. It
is those who can minimise their losses and choose the correct time to
realise their profits who become good traders. Fear and greed have
always moved markets. Have the belief in your decision making and don't
be greedy, small profits time and again quickly add up. Keep the
discipline, accept you will have losing trades and the moment you feel
you are breaking your rules, walk away. There is always another race,
another day and another trade.
Summary
Betfair Guide Step 1: Getting started
Betfair Guide Step 2: Placing a Bet
Betfair Guide Step 3: Lay Betting
Betfair Guide Step 4: Making use of the settings
Betfair Guide Step 5: Additional features
Betfair Guide Step 6: Trading, Cold Trading and Trading In-Play
Betfair Guide Step 7: Advantages of Exchanges and Sport Trading
Betfair Guide Step 8: Ten common mistakes made by traders
Betfair Guide Step 9: Trading with discipline
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