You may want to trade or actively invest your money because of your interest in the financial markets and strong aspirations of becoming a trader and investor and living a life of financial freedom. Or you may want to trade because you’ve earned enough money and now want to be free of a boss, enjoy life, and yet still earn an income. Whatever the reason for being interested in this lifestyle, this profession if approached the right way will allow you to actively manage money in all market situations while having the freedom to work for yourself. You will want to be a student of the markets and gain an appreciation for some of the things that are critical for success. Proper mindset, strict money management, and trading/investing with a clear plan are a few of the more important aspects to focus on when actively participating in the markets.
Keep it Simple – the KISS Principle
The typical investor and trader makes things much too complex. True, an unlimited amount of variables can influence the direction of the stock, currency and commodity markets, but that’s exactly why keeping it simple is so crucial for success in this business. Since our analysis will never be able to catch all possible variables, particularly in this ever more globally interconnected economy, we must find an approach that focuses on a finite set of checkpoints or else risk analysis paralysis. Overthinking is one of the primary reasons why many active market participants do not make money.
Traders and investors need a simple BUT a repeatable process. Novice traders often come into this business, trying out a new ‘technique’ each day, which in turn never allows them to see which approach actually works best for them.
Trading and investing techniques, or systems or approaches – whatever we want to call them – also make it more challenging for market participants to stick to the ‘rules’ of those systems.
A simple but repeatable process allows market participants to stick to their rules and get in and out of the market in accordance of those rules and leaves emotions at bay.
Stay Away from Nervous Day-Trading
The unfortunate reality is that too many novice traders and active investors come into this business thinking that day trading is the solution to their financial aspirations. This tainted reality comes with the allure of quick riches from nervously battling the flickering ticks all day long. More than 90% of wanna-be day-traders ultimately fail, often mentally exhausted and with significant drawdowns in their brokerage accounts. This reality of course is never told by those trying to sell you the ‘surefire’ day trading signal or worse, lure you into a day trading chat room where most of the time the moderators/traders don’t even trade real money.
The truth is that the intraday time-frame is by far the most challenging to succeed at. The constant news flow, algorithms and market makers gunning against traders can quickly push traders out of positions and lead to maximum frustration. Traders then quickly begin to over trade and worse, revenge trade (trying to get back their money), which of course inevitably leads to more losses.
Furthermore, few people have the time nor true desire to nervously sit in front of their computer screens all day and being at the whim of the next piece of news flow or algorithm to take their money.
Luckily there is a better way that not only fits most people’s lifestyles and time availability, but also has a massively higher probability of success. I call it ‘Swing Trading’ or ‘Active Investing’ and it is all about the multi-day to multi-week time-frame.
Trade the Swings
Why Swing Trading or Active Investing
1. No stress, no boredom: Swing trading captures a sweet-spot in the world of trading when it comes to time-frames. Swing trading doesn’t require the trader to be glued to the screens all day, nor is it too hands off. Swing traders can check on the markets a couple of times per day, while maintaining their day job, hobby or whatever else keeps them busy.
2. Comfortable holding time-frames: The typical holding period for a swing trading position is anywhere from two days to multiple weeks. This time-frame allows individuals to follow the news flow and price action without having to worry about the intraday ticks and noise.
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