There are thousands of traders making a lucrative full-time living on the stock market. There are many others who make decent money trading on a part-time basis. And then you also have a huge number of people making a loss with stock trading, because they either didn’t take time to learn the rules of the game, or they simply don’t understand them yet.

The most important reason for failure as a trader is not the market. It’s yourself. Once you realize that you are not really trading “against the market” but against your own weaknesses, you are on your way to become a successful trader. If you are afraid of risks, for example, or you hate to lose money, you will always tend to exit a winning trade long before it has reached it’s full potential. And you will also tend to stay with a losing trade long after you should have let it go, because you hope it will turn around and you can’t stand the idea of losing money.

To trade successfully you must learn to allow profitable trades to fully develop their potential. That needs a lot of self discipline. And you also have to learn to let go of a losing trade before it’s too late.

The best way to do this is to go into every trade with a set stop loss and a set take profit level. That means that no matter what happens, if the trade turns against you and you lose for example five percent of your money, you will get out. Similarly, you won’t exit a trade before you have made the profit as determined by the take profit level you decided upon before the trade.

Your final important step is to get the necessary education and software. Many online trading companies can provide you with both. Learn how the markets work. Study the workings of technical and fundamental indicators.

Then open a demo account and begin stock trading with the aid of the trading software using simulated money. Only when you feel sure that you can control your own emotions and that you know the fundamentals of the market should you venture into trading with real money.

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This entry was posted on Tuesday, May 4th, 2010 at 3:00 am and is filed under Investing.