Trading Plans, exit strategies, entry strategies, risk management, stop loss limits are all very important to trading. Many of us fail to realize that over and above all of these we should learn how to trade well. Greed is one factor that most of the time tries to overcome us and we land in trouble. In trading greed is the worst enemy for a trader. Greed while trading leads to pecuniary losses, we lose money when we are running after profits.
A sure fire way to learn to trade well is to take little baby steps and progress higher and higher. In this strategy the first step is to begin paper trading. Initially when I began to trade I could not understand what paper trading meant. It was something new to me. I still find some of my friends who trade are not aware of paper trading and its advantages. Paper trading is very simple to understand. In paper trading we carry out all the activities that we do while live trading except investing our precious money in these trades. We begin paper trading after our trading plans are ready. We carry out the trades as per our plans and watch the results. There is no specific period for which one has to do paper trading. It all depends on the confidence you have in your trading plan and the results of paper trading. If we find that the plan is working as we had expected then a couple of months paper trading should be more than enough. If we find that the plan is not yielding the results we were expecting then we may have to think of changing our trading plan and then begin to paper trade all over again. The best thing about paper trading is we can trade and see the results of our trading without losing any money.
When we are satisfied with the results of our paper trading we should move over to the next step of live trading with money. We have to be careful and start with one lot of the instrument that is commensurate with the capital we have deployed. We should not plunge headlong into investing all our capital. We should always remember that we are there to remain in the market and continue trading and not to shut shop and go home when all our capital has been lost. Any amount of paper trading will not be equal to live trading with money. When we do live trading with money all the emotions that were lying dormant while paper trading will begin to rise and control us. If we begin to trade in small amounts then we can easily learn how to control these demons. As we go along and gain more confidence we can scale up the trading lots gradually. What this all means is nothing but patience. For successful trading one has to have a lot of confidence in himself, his trading plans and more than anything tons and tons of patience. We should never trade with trade signals from a purchased system or tips from the news channels. Just think for a moment, if these things worked then why would someone propagate it and sell it when he can make all the profits for himself. Trading is a very personal activity. You should have your own plan that reflects your personality and takes care of your emotions and feelings such as risk taking capability or how much of loss you can take before going mad with rage.
Most of us while trading become tense and some of us even begin to worry about the results of our trades. This is because we are trying to control the trades. It is human nature and we always tend to control the environment. Trading is something like a roller coaster ride. In a ride what we do is simply try to enjoy the thrills of riding and do not try to control the roller coaster. This is because we cannot control the roller coaster. To enjoy the ride we just have to take it as it comes, feel the ups and downs and let the curves take us rather than fighting them.