What’s number 1 on the list of “what every trader needs to be successful”?
Legendary market analyst Bob Prechter offers this simple answer: A successful trader needs a method. A method equips a trader to act objectively, and to rely on a system -- instead of on emotions.
“Any time you enter or exit a market, it must be for a predetermined reason that will also apply in the future.”
–Bob Prechter
Enjoy this excerpt from the free
Club EWI report,
Money Making Rules for the Investor. Please read for yourself what Prechter says about the benefits of using a proven method.
What is the first requirement [to being a successful trader]?
Get a method. I mean an objectively definable method — one you’ve thought out in its entirety, so that if someone asks how you make your decisions, you can explain it. And if he asks you again in six months, the answer will be essentially the same. It must be developed as a totality before it is implemented.
It arrives full blown?
The point is that it must be in place before you start trading. It doesn’t typically “arrive” though. While a method has to reflect market reality, which is difficult enough, it also has to suit the user’s psychological makeup. To that extent, it must be built.
So you build your house and then live in it.
That’s a good analogy. You can redecorate; in other words, alter and improve your method from time to time. You can even move to an entirely new house. But don’t move in before the roof is on or all the walls are built. Above all, don’t tear down the doorway because the piano didn’t fit through it. Accepting the fact that you cannot achieve a perfect trading record is prerequisite for obtaining a reliable method. People who demand it are wasting their time searching for the Holy Grail. The number of people who waste time at it is amazing, and they never get beyond this first step of obtaining a method. They spend all their time designing and rebuilding, and never move into the house.
What is your method?
Money Making Rules for the Investor has more to say about the benefits of a method. In fact, the full report will give you a wealth of information about the six requirements for successful trading. They include:
1. A method
2. Discipline
3. Experience
4. Acceptance of responsibility
5. Accommodation of losses
6. Acceptance of huge gains – (This one always gets a chuckle, but it is critical to a trader's success!)