Wednesday, October 25, 2006

Millionaire Trading Tactics

Are there specific reasons why millionaires are millionaires? Do they share common characteristics? Should you get financial advice from someone who is broke, or someone who is wealthy? Thomas Stanley wrote several books about the affluent including The Millionaire Mind and The Millionaire Next Door. There are countless ideas from some of these texts that apply to trading. Today we will discuss a few of these ideas as well as using the night before technique to prepare for trading.

Millionaires

One major common characteristic amongst millionaires is the idea of safety of principle. Millionaires believe their CASH is their favorite possession, not their toys or other items. Because of this, millionaires take very good care of their cash by investing wisely and not compulsively. This idea is extremely practical in trading. One major activity that leads to the demise of traders is their desire for action. If the S&P 500 Index increases 10% this year and your portfolio increases 5% after 50 trades, what have those trades done for you other than waste your time and spin your wheels?

So trade like a millionaire, by being extremely selective about your trades. Quell the desire for action and instead focus on trades that are wonderful setups dying to be traded. Another common characteristic amongst millionaires is they are well informed and often usually invest money into financial and business advice. Just the same, traders should invest both time and money into investment newsletters such as The Wall Street Journal and in literature and seminars to increase trading skill and know-how. Like a millionaire, you can slow down and use the method below to execute trades.

Next, we are moving on to an effective, disciplined way to contemplate and act on trading information the night before the market opens. The problem with many traders is their uncertainty. We all know that short-term trading involves a great deal of uncertainty, But many traders are feeble and hesitant while in the trading process itself and during trade selection.

The Night Before

An excellent method of overcoming this is to prepare the night before trading. Here are the specific steps you should take: Many traders narrow it down to around 3 choices when deciding which trade to take. The problem with doing this intraday, is that the psychological pressure and noise that comes from news sources, friends and the trader's own conscience are too distracting. This greatly interferes with the effectiveness of most traders.

So narrow down your trades to the night before. It will only take 15 minutes to look at your 3 charts and to understand the risk and history behind each trade. Get some rest overnight, and you won't even have to think about which one to choose. Instead, you will be subconsciously processing the trade set-ups and the risks involved in each trade in your sleep. By the time morning rolls around, you will have thought further about your trades and will be ready for a strong decision with energy that the morning brings. In conclusion, think and trade like a millionaire and try thinking about your potential trades the night before the market opens and watch your results improve!

Good day and good trading.