After talking and corresponding with hundreds of traders global macro and otherwise over the last several years here are a few things that they learned the hard way. A few of the rules may sound cliche but they are the truth and they are time tested principles of successful trading.
Risk Management is Key: Many people have yet to learn that if you don't focus on risk then risk will focus on you. You may think that you are fine just picking good stocks, options, or whatever trading instrument you use. The truth is that if you are only looking at your entry then you are missing the boat. Once you see a potential opportunity you must analyze it and find the potential risks. Once you know your downside you can better determine other variables such as how big a position you can put on and if you should put it on at all. We have all heard that we need to let our winner runs and cut our losers short. If you have heard it but haven't been following it then it is time to change your ways.
Each Trade Is Independent: Another name for this is process versus outcomes. If you focus solely on the results of each trade you will go nuts when the inevitable losing streak come about and it could destroy you. Instead focus on doing the process right. Whatever your style is look and write down a lost if what you need to do before, during, and after the trade. Then when looking at your results you can evaluate them within context of your framework. If you followed it then you know that more often then not you will make money and losses are just the cost of playing.
Understand Opportunity Cost: In order to apply this to your trading you have to first look at what it means. Opportunity cost is what you are missing out on by making a choice. If you are in XYZ and you have no more capital then you may be missing the potential to make five times in ABC. Make sure that you are weighing the risks and the rewards before making a trade.
Learn To Use Research: Many people hesitate at paying for research and yet they have consistently bad trading ideas. If you are reaching your profitability goals on a consistent basis then good for you. If however you are like most traders and want more then maybe it is worthwhile to invest in some infrastructure and outside research. Try out several different services and find some that fill the gaps in your research. Most good traders subscribe to 3-5 different newsletters and a 1-3 different software products. Subscribing and then learning how to use these tools can give you an endless stream of solid and actionable trading ideas.
Continuing Education For Global Macro Trading: If you want to be good and competitive in the global macro arena you have to be at the top of your game. You need to be reading and reading and learning about everything you can so that you don't miss the big dislocations in the global economy.
Well Being: A lot of traders underestimate the value of having good health. Study after study prove that the better your body is, the better your mind can function. Of course the better your mind functions the better you will be at trading and you will make more money.
We could go over each of these for hours and hours but the reality is that most people know at some level that they need to improve but human nature allows to to far too easily skip some steps while looking for shortcuts. Become efficient, not lazy and you will become a great global macro trader. - 15224
Risk Management is Key: Many people have yet to learn that if you don't focus on risk then risk will focus on you. You may think that you are fine just picking good stocks, options, or whatever trading instrument you use. The truth is that if you are only looking at your entry then you are missing the boat. Once you see a potential opportunity you must analyze it and find the potential risks. Once you know your downside you can better determine other variables such as how big a position you can put on and if you should put it on at all. We have all heard that we need to let our winner runs and cut our losers short. If you have heard it but haven't been following it then it is time to change your ways.
Each Trade Is Independent: Another name for this is process versus outcomes. If you focus solely on the results of each trade you will go nuts when the inevitable losing streak come about and it could destroy you. Instead focus on doing the process right. Whatever your style is look and write down a lost if what you need to do before, during, and after the trade. Then when looking at your results you can evaluate them within context of your framework. If you followed it then you know that more often then not you will make money and losses are just the cost of playing.
Understand Opportunity Cost: In order to apply this to your trading you have to first look at what it means. Opportunity cost is what you are missing out on by making a choice. If you are in XYZ and you have no more capital then you may be missing the potential to make five times in ABC. Make sure that you are weighing the risks and the rewards before making a trade.
Learn To Use Research: Many people hesitate at paying for research and yet they have consistently bad trading ideas. If you are reaching your profitability goals on a consistent basis then good for you. If however you are like most traders and want more then maybe it is worthwhile to invest in some infrastructure and outside research. Try out several different services and find some that fill the gaps in your research. Most good traders subscribe to 3-5 different newsletters and a 1-3 different software products. Subscribing and then learning how to use these tools can give you an endless stream of solid and actionable trading ideas.
Continuing Education For Global Macro Trading: If you want to be good and competitive in the global macro arena you have to be at the top of your game. You need to be reading and reading and learning about everything you can so that you don't miss the big dislocations in the global economy.
Well Being: A lot of traders underestimate the value of having good health. Study after study prove that the better your body is, the better your mind can function. Of course the better your mind functions the better you will be at trading and you will make more money.
We could go over each of these for hours and hours but the reality is that most people know at some level that they need to improve but human nature allows to to far too easily skip some steps while looking for shortcuts. Become efficient, not lazy and you will become a great global macro trader. - 15224
About the Author:
Jeff works at TheMacroTrader.com Which publishes a weekly newsletter on macro trading using ETF's. TheMacroTrader newsletter Is for investors and traders that are looking for actionable global trading ideas.
