Give me 10 minutes with a trader and I can tell whether he is or will be successful and it has nothing to do with looking at his trading account.  Finding a successful trader is as hard to find as a needle in a haystack.  Why?  Traders fail for many reasons but the main reasons revolve around the following:

• 1) There is no trading plan. If someone were to ask you right now how you make your trading decisions would you be able to tell him? Is it a written plan and do you have it memorized? Can you point it out on a chart? Is it easy enough for a child to understand? If you do not have a trading plan then go ahead and plan on raising a white flag when you enter the battlefield. You will not survive for long.

• 2) There are no clearly defined exit points. And I do not mean for winners only! If a trade is working where do you take profits and if a trade is not working where do you decide to cut your losses? These decisions have to be made before you enter the battlefield. Very simple questions that require simple answers.

• 3) There is no money management plan. Do you calculate how much you are going to risk in the trade or do you gamble with different amounts of money depending on how your last gamble went? The best way to manage money is to put the same amount of money into each trade no matter what happened on the last trade. In other words, if you lost money on the last trade why trade cautiously? This one could be the winner. If you made money on the last trade why double up? This one could be the big loser. Proper use of your resources allows you to trade another day.

• 4) Your chart looks like a road atlas. How many indicators do you look at? Does your battlefield entry chart have so many lines and colors and arrows and indicators that it takes you a few minutes just to locate the candles? Trading boils down to a few simple rules and an even fewer number of weapons. If you tried to use all the weapons available to the trader today you would throw your hands up in confusion. Analysis paralysis would quickly set in and you would not be able to discern a buy from a sell signal. There has to be a happy medium between too much and not enough.

Sun Tzu was able to predict the winners and the losers based on the preparedness of the general under scrutiny.  Listen to what he has to say.  It is just as relevant today as it was when first penned 2500 years ago:

Now the general who wins a battle makes many calculations in his temple before the battle is fought. 

The general who loses a battle makes a few calculations beforehand. 

Thus do many calculations lead to victory, and a few calculations to defeat: how much more no calculation at all! 

It is by attention to this point that I can foresee who is likely to win or lose.

TRADING IS WAR. PREPARE YOUR WEAPONS.

Post from: The CrossHairs Trader

STOCK AND OPTIONS TRADING SUCCESS CAN BE AS ELUSIVE AS A NEEDLE IN A HAYSTACK

Related posts:

1. THE ACCESSIBLE BATTLEFIELD TERRAIN: TRADING STOCKS AND OPTIONS IN A TRENDING MARKET
2. THE CROSSHAIRS TRADER DICTIONARY: COORDINATED ATTACK WHEN TRADING OPTIONS
3. TRADING STOCKS AND OPTIONS LIKE A CHILD

Last 5 posts by David Blair

• THE THINKING TRADER 11/20/2009 - November 19th, 2009
• OVERTRADING: YOU MIGHT BE A STOCKAHOLIC IF… - November 17th, 2009
• THE THINKING TRADER 11/13/2009 - November 13th, 2009
• VETERANS DAY 2009 IN THE CROSSHAIRS - November 11th, 2009
• THE ART OF TRADING VERSUS THE ART OF DECEPTION - November 10th, 2009