Sunday, December 28, 2008

Method, Money and Mind

Trading is a life experience , it is not like any other business.As you become a better trader, you become a better person. But as you evolve it is difficult to look back at where you were.Dr.Alexander Elder describes about three M's. Method, Money and Mind.Method refers to how you find your trades- how you decide what to buy and sell.Each trader needs a method for choosing specefic stocks, bullions, commodities, currencies, futures, or options as well as rules for ' pulling the trigger' deciding exactly when to buy and sell.Money refers to how you manage your trading capital.You may have a brilliant trading system , but if your money management is poor, you are guranteed to lose money.You have good system, money management and if you dont have the commitment and discipline to stick to your system and money management , then also you are sure to lose in the currency markets.Hence Mehtod, Money Management and your Mind are important in trading.Traders go through three stages of development.In the first stage they are more focussed on Method.Those who survive that stage get focussed on both Method and Money Management. Those who survive that stage add one more component, Mind and all the three put together the trader will be able to make consistent profits from the market.Those who reach that stage become more relaxed, quieter, not jumpy in the markes.They are focussed well on money management and risk orientation.Their trading system is in place, they are at peace with themselves and they spent more and more time thinking how to allocate their trading capital in order to reduce overall risks.This takes years of experience to reach this stage.Forex trading is not get rich quick scheme.Like any other profession in medicine, law or arts , to become an expert trader and to trade for living also takes time.Muraleedharan

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