How To Succeed at Trading

Today I want to touch upon success in trading.

I'm fortunate to know many successful traders. Many share a common trait; they're high integrity people. But as far as education and background goes, they each have little in common.

So what makes them so successful? Why have they succeeded for so long?

There are two things that stand-out to me. Each tends to be risk averse. They are in one way or another great risk managers first, and strategy people second.

The other trait that they share is that each dominates one (or at best two) markets. They're experts in what they do. They don't bounce around from forex to stocks to futures to bonds. They focus in one arena and eventually dominate that arena.

Many people believe that because they trade one market they can trade them all. In reality it's not true. It's like saying that because someone in an athlete, they can pitch in the major leagues and also be playing professional hockey at the same time. And by the way, they'll also be playing in the NBA playoffs tonight. Yes, each of these sports requires athletes. But they're dominated by the best athletes of each sport. There is no cross-over.

Would you feel comfortable seeing a pediatrician if you had sharp chest pains? He's a doctor, isn't he? Yes, he is. But he's not a specialist of the heart. He's a specialist who works with children and he's possibly great at it; but he's not someone who has been trained to deal with a serious heart condition the way a great cardiologist has. You go to the specialist because the specialist knows the most and is likely the best.

The same holds true for trading. You need to do one thing and do it well.

For us, it's reversion to the mean trading, especially with ETFs and stocks. For others, it's day trading e-minis, and for others it's trading forex. We do have programs we day trade, and we do have programs that we trade with in other markets. But what we do best is identifying overbought and oversold conditions in ETFs and stocks and then quantify the edges. When I wake up in the morning, I'm not thinking about breakouts, GM's pending bankruptcy, trend lines, forex, or Fibonacci retracements. If I did, it would be chaos. I think about one thing: how overbought and oversold the markets are and where the best statistical edges are for the next 3-5 days.

The point is not to think exactly as I do. The point is to focus your energy and become great at one thing. Many of my friends who have succeeded and have created great wealth for themselves and their families are professional traders. But at the end of the day, they're traders who are great in one arena and have achieved this success by being single minded in that one arena they do best.

In trading (and in many things in life), your focus dictates your success.

This is from Larry Connors Daily Battle Plan which he publishes each morning. If you'd like to take a free trial click here, or call 1-888-484-8220 ext 1 to start your free trial today.

Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.