Forex Secret - Seven Characteristics Of Winning Investors by wancombee

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To successfully practice any investing discipline, a trader must understand his own mindset regardless of emotion and opinion. As the legendary trader Jesse Livermore explained, a winning investor must develop certain vital characteristics that become a proper trading psychology.

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									                               by Avinash Agrawal

        And here, the philosophy of Zen and the art of market acceptance



To successfully practice any investing discipline, a trader must understand
his own mindset regardless of emotion and opinion. As the legendary trader
Jesse Livermore explained, a winning investor must develop certain vital
characteristics that become a proper trading psychology.

Centeredness: There are three key components of our being: body, mind,
and spirit. The winning trader is in complete harmony with all aspects of his
or her being. Being centered allows him to analyze his own goals and
methods, escaping the emotions of the crowd. This enables him to make
rational decisions.

Acceptance: Total acceptance of the changing state of the markets and
stocks is very important. By nature, the human mind is in a limbo, leaning in
and out of decisions and opinions. But if the market is showing signs of
distribution and leading stocks are breaking down, the winning trader
accepts that and takes appropriate action.

On the other hand, if the market has just followed through on a new rally
and leading stocks are breaking out, such an investor is not in denial of the
new market uptrend and does not heed his emotions, which tell him to either
wait for more confirmation, or wait for lower prices in stocks before buying.
The winning trader is decisive, and totally accepts the state of the stock
market in the here and now.




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Patience: Jesse Livermore once said, "The desire for constant action
irrespective of underlying conditions is responsible for many losses in Wall
Street even among the professionals, who feel that they must take home
some money every day, as though they were working for regular wages."

The winning investor diligently studies the markets every day, then waits
patiently for the right market conditions. Investors greatly increase their
odds of succeeding if they research carefully and intelligently define a
potential entry point in advance, then wait for it to come to pass in the real-
world markets. Patience eliminates the possibility of the dangerous impulse
trades so common in daytrading.

Livermore also said that the big swing (the major trend) makes the big
money, not the small fluctuations that occur in stocks. The winning investor
studies general market conditions, takes his positions and, if he does not get
stopped out on them, holds on to his positions without getting shaken out on
normal reactions. The winning investor never loses his positions; he does not
take small profits in what can be a big move in stocks. As Livermore said:
"It was never my thinking that made the big money for me. It was always
my sitting tight (with my winning positions)."

Trust: The winning investor has trust in himself. It follows that he trusts his
chosen system, whether it is CANSLIM or any other system he has
thoroughly researched. He knows that his system works, especially if
followed diligently over time. No matter how the markets act in the short
term, he never loses this trust, but is able to follow and apply his system,
unattached to the results of his trades.

Note this does not mean the winning investor keeps making trades all the
time; it simply means that when his investing system tells him to act or wait
patiently, he follows the message of his system unquestioningly. The
winning investor has traded and studied his system so thoroughly that the
method's dynamics have become ingrained in his subconscious.

Humility: According to Livermore, "Markets are never wrong; opinions
are." Not even a world war can keep the stock market from being a bull
market when conditions are bullish, or a bear market when conditions are
bearish.


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             forex strategy - technical & fundamental - risk management -
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To make money, all a trader needs to know is to appraise current market
conditions, hold onto his winners, and cut his losses short.

The winning investor is humble and knows that the market is always right.
Therefore, he does not hold any preconceptions of where the market or
stocks will be in the future. He knows that the market can prove him wrong
anytime; he acknowledges a mistake in his analysis and judgment, and takes
appropriate action.

Averaging up: Winning investors always average up; they never average
down on any stock. Jesse Livermore, said: "When I am bullish and I buy a
stock, each buy must be at a higher level than the previous buy price. I must
buy on a rising scale. I don't buy long stock on a scale down, I buy on a scale
up." For example, a winning investor might initially buy only half of his
intended position in any stock, and only when that stock shows him a small
profit by moving up or breaking out through a resistance area does he add to
his existing position. He never buys more if the stock moves lower than his
previous buy price. Not only does this reduce risk, but it also helps the
investor have conviction in the positions that he accumulates.

Not listening to the news/analyst/public opinions: It is very important for
investors to disregard the news as reported on television and newspapers, as
well as any other analyst or public opinion. The winning investor follows
only the action of the market itself, along with the action of the leading
stocks; he is confident in his analysis of what the market is telling him. It is
also important to interpret not the details of the news, but how the market
and stocks react to it. If prevailing stock market sentiment is bullish, then
bad news is ignored; if sentiment is bearish, then good news is disregarded.

Jesse Livermore said, "If there is a solid bull foundation... whether or not
what the papers call bull manipulation is going on at the same time, certain
news items fail to have the effect they would have if the Street was bearish.
It is all in the state of sentiment at the time."

Whether you invest on your own, or through a stockbroker or money
manager, make sure to emulate the psychological characteristics of winning
investors instead of relying on opinions, feelings, or emotions.



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