I have been trading now seriously
for just over a year. I did start trading about two years ago, but it wasn’t
until May last year when I start taking it more seriously. During this time I
have read many articles on forums and also, more recently, I have started to
read books on psychology and the mental aspect of trading in general.
I would say that trading has three main parts to it:
All parts of the machine are
needed to become a good trader.
Strategy
Everybody needs a strategy for
trading. The strategy can be related to when certain odds are reached before or
during a football match or a tennis match. This will be a point where you have
an edge. This edge normally comes about by looking at historical odds data in
that particular sport.
Another way of creating an edge
is to look at historical data of a certain sport, or certain teams or players.
This involves understanding the sport and the statistics and history of the
game. An example of this is laying the draw.
When designing a strategy or even
when using a strategy from somebody else, it is very important that you
back-test the strategy or test the strategy with minimum stakes. It is
important that you are completely confident in a strategy. This is particular
important when it comes to the mental aspect of trading.
Risk/Money Management
You can have the best strategy in
the world, but if you don’t have good risk/money management, you will not be
successful. Everybody knows that a strategy will never be 100% successful; it
is all to do with probabilities. Therefore with good risk/money management you
control your losses and maintain your bank so you can fight another day when
you have a bad day, which you will always have.
I tend to risk only 5% or less of
my bank on any one trade
In the next post I will talk about the mental aspect of trading as this is the most important part of trading.
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