Trends were present even before the advent of the trader into the Markets and trends will make their presence felt even after the trader is absent from the Market. Trends will remain so long as the traders are there to trade any tradable Markets.
The success a trader achieves in the Securities Markets is directly related to the trader's ability and proficiency in understanding the trends, identifying the trend and then trading that trend. The synopsis behind trading a trend will never allow a trader to catch the exact high or the exact low. A trader should never ever try to catch the exact high or the exact low in the Markets. Leave this bit to the analysts who derive thrills out of this. But to these analysts also this habit of catching the exact high or the exact low, carries no significant meaning apart from fulfilling a certain commitment the prices make on the charts.
A trader has to identify an ongoing trend even before he makes an attempt to trade it. The only problem being which of the following trends are present.
The fact is that if a trader develops a habit of trading the trends, he will never miss a move the Market makes. Whichever side the prices may move… "up or down". Rest assured a trader will never miss the turning point in the Market, where the Bear phase ended and the Bulls took charge of the Market and vice versa. And all this at a cost of forfeiting a few percentage points to the Market. This gives the trader the advantage because by trading a trend, no turning points in the Markets will or should ever be missed. Thereby directly profiting from it by "Taking Long Positions" or "Taking Short Position" or "Exiting Long Positions", or "Cutting Short Positions".
Making a plan is the most important prerequisite of forming a trading strategy. A trader who has no plan to trade in Securities Markets will with certainty takes losses regularly. Ingredients required to make a good plan are…
Every chart has a story to tell. It is this understanding of the story and its analytical moral, which is referred to as knowledge. A trader basically has to have in-depth study about trends present in the Market. Secondly the trader must know how to go about applying this study of trends while formulating a strategy, which in the future will be used for trading. Without having this knowledge, "all strategies" however well formulated are destined for failure.
High level of discipline has to be developed in making of a strategy, for trading the trend. This is easier said than done. In effect discipline is a must for trading any strategy a trader may put forth. In short whichever strategy is formulated, a trader should observe all the rules laid down in it. Remember that discipline is the most important factor, which is going to determine a trader's failure or success.
Market trends are predominantly influenced by emotions. These emotions may come in form of "Greed" or "Fear" or "hope". These emotions are destructive by nature. Unfortunately every one of us is born with these destructive emotions. We can't be rid of them but the next best thing we can do is effectively control them. A trader must honestly and sincerely build a trading plan, wherein the destructive emotions are negated by the strategy itself.
A well laid out trading strategy or plan will have measures, which never allow losses to build up. While building a trading plan a trader should lay strong emphasis on built in strategies within the main plan to protect the Capital and Profits. Traders have to remember that the name of the game is always the protection of the Capital. Mistakes will be made in reading the trend. If the trading plan protects the capital and when the next trend unfolds the trader is ready to take advantage and be with this trend till the very end.
A trading plan should always be made with immense trust and faith in its ability to deliver. It is not easy to make a trading plan or strategy. "Hours", "Days", "Weeks", even Months could get consumed in laying out a well-formulated plan. A trader must have faith in the work and efforts put in while formulating it. Nothing should make him sway away from the strategies formulated in the plan, which was constructed brick by brick.
A trader may have all the knowledge in the world but does not back it with the courage to take action, cannot make any money. The good strategically constructed plan gives a trader the courage and the confidence to act on the current trade, which is likely to be executed. So once the plan is in place just move ahead and follow it.
When trading a trend it is mandatory that a trading plan be in place. A trading plan should have the capacity and inbuilt architecture to capture the major moves in the Market, irrespective of the directional movement of the prices. A plan adhered to unemotionally will, with certainty take out all the emotions from a trader's trading. Which in any case would remove the roadblocks to trader's financial health?
As is evident from the historic data, trends can last from hours to years. These trends will have dips, pullbacks and motive actions. During these trending phases in the Market a trader has to remember that he should only trade in the direction of the trend. Just remember if a trading plan has built in strategies to react to counter trends, the plan would make losses for the trader. Ignore the plan and formulate a new one. Leave the counter trend trading to the professionals.
Trading plans, which inculcate volatility in their system, are very often the successful plans. Successfully built trading strategies do not ignore volatility. Traders have to always remember that volatility is one of the more dependable factors, which will ensure a trader his profits.
There is no doubt that short-term trends are dominated by emotions. It is a possible to benefit financially from short-term trends. But a vast majority of traders don't. Short-term trading is best left to professional traders who have disciplined themselves to have few or no emotions. These traders have an inbuilt mechanism in their system to react to any adverse Market conditions in the short-term at a drop of a hat. These professional traders have years of experience behind them thus enabling them to take a minor loss and allowing their profits to accumulate. Short-term trading is best left to the seasoned traders.
Once a trading plan is in place let nothing deters you from the plan. May it be an advice from a Friend, Current events, Newspapers, TV Channels or Investment Gurus. There is nothing any one can have against these Investment Gurus. They are masters in their own right. When giving their advice on Television or the Newspapers they might be advising based on their own plan, which could be formulated on a very Long-Term strategy. And a trader's plan may be based on an Intermediate-Term time frame. Therefore a minor correction for an Investment Guru could mean a loss for the Intermediate-Term trader, whose trading plan would not have factored in the ingredients required for the Long-Term plan and vice versa.
Highly disciplined plan is the recipe for highly successful trading strategy.
Successful and powerful plans have inbuilt strategies for identifying trends and patiently allowing these trends to unfold.
Emotions have no place in the trading plan.
Successfully formulated plans never allow the traders capital to be hurt.
Successful trading plans allow for timing the Market by making a right entry and an even more correct exit.
Successful trading plans incorporate in their system, not to anticipate a turnaround in the existing trend but react to the change in the trend.
REMEMBER THAT A TRADER OR AN INVESTOR MUST ALWAYS ADHERE TO TIME TESTED AND TRIED STRATEGIC TRADING PLAN. THIS IS THE ONLY METHOD, WHICH WILL ENSURE THE TRADER OR AN INVESTOR A FINANCIAL GROWTH.