Here at Srilanka Share Market, we’re on a mission to provide first hand information to those who are willing to invest or trade in Colombo Stock Exchange. Also heading into share market could be scary, but we SriLanka Share Market turn that fear into fun by providing educational, research materials from respectable sources.
Talking about wealth and money is a sensitive topic for many people. If you are one of them, chances are, you are holding on to negative beliefs that you picked up from those around. Inspired by Secrets of the Millionaire Mind by T. Harv Eker, we created this infographic to help you understand the difference between a successful and unsuccessful mindset.
“You don’t trade the markets; you only trade your beliefs about the markets.” – Van Tharp
Just like there is no ‘Holy Grail’ trading system that never loses, there is also not one ‘best’ trading method.
All trading methods have good points and bad points with advantages and disadvantages.
Many traders make the mistake of thinking their way is the best and only way to trade. In my experience, I have made money through multiple trading methods and seen other traders do the same. The real keys to profitable trading is in risk management, reactive technical analysis, and discipline not in a specific time frame. There is good news and bad news about every trading methodology. It is not about finding the right trading methodology it is about finding the right trading methodology for you. It has to fit the amount of screen time you can spend trading, your personality, risk tolerance, and account size. It’s not the time frame that you pick to trade that determines your success, but your work in back tests and research of the price action in that historical time frame that makes all the difference.
Day traders: The good news is that you have no overnight risk. The bad news is most day traders watch the market action almost all day long and day trading is the most stressful type of trading for most people. It requires lots of screen time and quick reflexes to take entries and exits.
Trend followers: The good news is that you will be on the right side of major market trends, and you will not have to take very many entries and exits. The bad news is that you will not make money in trendless and choppy markets. Many trend following systems even underperform in range bound markets.
Swing traders: The good news is you are profitable more times than not buying at high probability supports and shorting into resistance levels. The bad news is that in trending and parabolic markets you have to take stop losses quickly or risk big moves against you.
Growth Investors: The good news is that you can buy the stock in a company you study and see the high probability that it will continue to grow, and have rising profits and sales to drive the stock price up. You can make a lot of profits by being in the right company in a bull market. The bad news is that in bear markets the downward storm sinks all ships, even the strongest ones.
Option traders: The good news is that you can control your total risk of loss through contract size, and at the same time capture a move through leverage. The bad news is that options can expire worthless, or go to near zero while you are holding them. Also with options you have to be sure that they are liquid enough to trade, or the bid/ask spread will be very expensive in entering and exiting them. Also, with options, you have to be right about the direction of the move and the time period in which it will take place.
The right question is “What is the best trading method for you?” The best trading method is one that you can stick with and trade over the long term. You need a method that fits who you are and what you want to accomplish as a trader.