Practice like a doctor to trade well

By Jeff White

Struggling traders are always asking about various indicators or whether they should be watching 15-minute candles vs. the VWAP. They'll give their left leg just to gain some kind of an edge, but they're missing the boat when it comes to lasting improvement. If only trading could be easy!

Trading itself is not a complicated subject. You can certainly make it complicated by piling studies onto your chart or reading the endless opinions of analysts, but none of that translates directly into profits. In order to get those, there's one thing you have to do. At the risk of stating the obvious, let me remind you of the incredibly simple goal for any trader: to sell at a higher price than you buy.

For whatever reason, that just isn't fancy enough for some folks. Complicated, to them, is better. Never mind the notion that the difficult part of trading boils down to doing just two things very well - closing out bad trades quickly and staying in good trades as long as possible.

It's no surprise that the great traders are continually fixating on how to do those two things better. They care not about making their charts look prettier or how they can add another screen to their desktop or relying upon some software enhancements to help them turn the corner. All that matters to the best traders is to focus on the things which add to their bottom line. Naturally, they spend their time honing the two skills of exiting losers and staying in winners.

Remember to Practice

I know a few doctors, and each of them refer to their business as "a practice." They're highly qualified, they've been through years of formal education, they've passed intense exams and they've for years been called "Dr."

So why do they say they practice medicine ? Because they're constantly learning. They're still being educated - not in a classroom, but through real-life patients who are counting on them for help in healing. Yes, they embrace the challenge, and yes, they have seen many of the same cases before. But it doesn't stop there, because for them for them to succeed they must rely partially on what they've already been taught, while keeping an open mind for what may work better with reduced risk to the patient.
Traders would do well to adopt a similar mentality.

Maybe you've attended the market's School of Hard Knocks, or maybe you had a mentor show you the ropes. Your background as a trader is somewhat important, but it's not everything. It might make you some money this month, but in a few months or a couple of years, if you haven't figured out how to make adjustments in a changing market, you're done.

Instead, consider the following mindset. Each day, what if you prepared as fully as possible and then executed your plan with complete discipline? Those are important tasks which every trader should be doing. But it cannot stop there.

In addition to those basics, what if you continually asked yourself how you could have detected signs of trouble in your losing trades sooner in order to trim those costs of doing business? And perhaps most importantly, what if you constantly looked for ways to stick with your best trades longer? Don't you think you'd see some consistent growth not only in your account, but also in the intrinsic rewards of better trading?

I'm confident you would.

With that in mind, approach your trading carefully. Use indicators as confirmation of what the price action is already telling you. Alignment of the indicator stars may never happen, and even if it does, that will only provide you with an entry for your next trade. Think big picture, and always keep in mind what's most important in your trading - both in the near term and for the long haul.

I can tell you it's not a magic bullet, it's not a faster PC and it isn't some fancy software that gives you red and green arrow signals. You just have to reduce the damage of losing trades as much as possible, and maximize the winners. Plain and simple, but it takes practice.