To be successful in trading, it is necessary to understand and learn these fundamental theories and, at the same time, learn a method of thought which will help implementing them in trading activity.

The knowledge and implementation of these 4 fundamentals is probably what makes the difference between successful and unsuccessful traders. Traders who make profits continuously and in the long run, have consciously or unconsciously:

1. understood their market and the effects that it could have on their mind;

2. eliminated, or learned how to cope with the negative effects of trading;

3. found a methodology - often through a thorough, long lasting research, and demanding practice - which gives them a probabilistic edge on the market. Generally, successful traders have found a method which is adapted to their personality and best capabilities (to use a marketing term: they have found their own trading niche);

4. implemented money and risk management strategies which allowed them to reach point 2 (eliminate the negative effects) and contributed to generate profits on a regular basis.

The objective of this series of articles is to explain the fundamentals of trading and how to implement a training program which will highly increase the probabilities of success, to anyone who has a passion for trading and wants to be successful at it.

In this first article, we’ll start by analyzing the market and its specific characteristics. We will see how the implementation of certain mental strategies, which usually lead us to success in our every day life, can be dangerous in the trading activity.

In any financial market, the creation of a market price occurs through the confrontation between buy and sell decisions. It is made of individual decisions (billions of them), which generate a continuous and collective decisional stream. This stream is what defines the price of a specific market instrument at a specific time. As traders, we have the possibility to continuously make multiple decisions (based on expectations) about: the market direction, the amount of invested capital, loss limit levels, the duration of a trade, etc., with the possibility to modify our decisions any time.

These decisions aren’t only based on rational elements (as developed in the theory of Efficient Market Hypothesis or EMH) but, also on irrational and unconscious elements, which continuously invite us to change our mind, sometimes very rapidly.

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