5 Tips to Long Term Success in the Stock Market

Oh, the joy and excitement of being a new stock trader. You’re enthusiastic, motivated and happy to share the gospel of all things trading with anyone who’ll listen.

You wake up in the morning (or during the night) and pull up Bloomberg or your online broking account on your iPad and check your trades. Those first few wins are bloody awesome! You jump on the phone and tell your friends “Get on board! Don’t miss this boat that is stock market trading. The ship is leaving the dock and you don’t want to miss out.”

Soon you experience your first trading loss; a loss that smacks you in the guts. It’s hard to take but you step back up and take the next trade. Another loss. This ain’t so fun anymore.

From experience I can tell you that this is the point most people quite. 3 months is the average length of time new traders will try a strategy. “This strategy is broken!” they scream and take to Facebook complaining they have been ripped off. I call this the Beginner’s Cycle.

Before I tell you how you CAN succeed in the stock market let me remind you that you trained longer than 3 months for the job you are currently doing, even if it was only on-the-job training and not a formal qualification. Success takes time. Imagine if our doctors only trained for 3 months…

These are the 5 tips for long term success in the stock market:

1. Find a strategy that suits your personality. There is no point trying to trade an intra-day strategy if you can’t access your online trading platform during the day or if you have a job that means your focus is elsewhere. Instead look for a strategy that fits your schedule. If you only have a few minutes to commit each evening then choose an end-of-day strategy that you can implement when you come home from work in the evening.

2. Test it. Don’t take the sales person’s word for it. It is your money so it is your responsibility to test the strategy and make sure that it does what you expect and that you will have the ability and discipline to stick with it. You can test the strategy in a couple of ways; by paper-trading or using trading software such as RealTest.

3. Do it. You’ve tested the strategy now go ahead and do it. Allocate the time you need each day to place your trades. Set an alarm on your phone to remind you to sit down and do your work (trading is a business and as such, when trading you are working).

4. Keep a trading Diary. Each trade you buy or sell keep a diary recording what you did and how you felt when you did it. At the end of the week go back over your diary and review your comments. If you were questioning or over-riding your strategy then ask yourself, why? How can you do better in the week ahead? Write down those goals.

5. Follow strict risk management rules. A simple way to make money trading is to cut your losses and let your profits run as outlined in this video titled “What Makes a Successful Trader?”.

Remember: trading is a business. Treat the stock market with respect and you will be around a lot longer than most investors.

Nick Radge is a trading veteran and Head of Trading & Research at The Chartist.