Secrets of Successful Traders

There are as many different opinions on what makes for trading success as there are stock market investors. Successful trading is not built on a foundation of secrets, but on solid skills and knowledge. Both come with experience. As a beginner, educate yourself as much as possible about the stock market, learn the terminology, learn money and risk management and develop skill and edge. When you have grown accustomed to riding the market, you will find what works and what does not. This is your personal strategy development.

Know the Stock

While some professional traders swear to knowing only their stocks' three-letter initials, most will benefit from more thorough know-how. Greenhorns in particular should research the company and the stock before buying. It helps to monitor stock movement in the charts, as charting reveals possibilities and gives you more options.

Psychology

In more specific terms, psychology refers to your attitude toward risk. How you react to risk shows what kind of trader you are. How much of your capital are you willing to lose? Ask yourself similar questions.

Probability Factor Scale

Some traders use probability factor scaling. For example, a stock going upwards has a 70 percent chance of continuing up, a 20 percent chance of going sideways and a 10 percent chance of going down. The same probabilities apply to stocks going down. Sideways trending stocks has a 50 percent chance of going up or down.

Skills/Edge

Edge is about mastering your own trading style based on your experiences. Positive historical results are great, but know how you came up with them. Like losses, profits can surprise you. Without understanding how you won, you won't be able to formulate a trading strategy. Skill is having a strategy that works most of the time. Risk management may not be enough to stop your downward trend if you have no edge.