Have a Healthy Time Horizon
One of the biggest problems new traders have is that they think they will make a
large amount of money right away. They think they will get rich quick. This type
of reasoning is very similar to the short-term thinking in American business in
general, usually managing for the current quarter’s profits, focusing on short-term
earnings at the expense of long-term investment and profit growth.
TRADE FOR PROFITS OVER TIME
Traders tend to get wrapped up in current market conditions, the news of the day
and the current trade, usually at the expense of the big picture and profits over
time. My grandfather used to have a saying, “You can’t go broke taking profits.”
He was very wrong. You can go broke taking profits. If you take profits before
the market tells you to, or you succumb to fear and close out the trade before its
time, you are focusing on the short-term and forgetting how to make money over
the long haul. Close out no trade before its time.
GIVE YOUR TRADING STRATEGY ENOUGH TIME TO WORK
We tend to be impatient, and we sometimes think that we should get instant
gratification. This will not work in trading. The only way you will really know
whether you are a successful trader is to be successful over time. A week or a
month will not be enough time to tell you how you are doing. You should be
trading with the objective of making money in the long run, consistently, and with
the confidence that your strategy will make money given enough time.
One of the benefits of trading with a strategy is that having done the requisite
historical testing, you should know how long it should take you to start making
money. You should have an idea as to the length of time that the strategy has lost
money in the past, how much money it has lost, and how long it will take the
strategy to become profitable. If the strategy has proven profitable historically, it should be profitable in the future. You just need to give it the necessary time to do its work.