1. Know how to spot a high probability trade. 2. Have a well thought out plan to enter/exit a high probability trade when it occurs. 3. Well thought out risk management strategy. 4. Discipline and patience to sit on hands until high probability trade sets up. 5. Discipline to execute entry, exit and risk management plans without fail. This is nothing that has not been written or stated endless times already. With a reasonable amount of intelligence, reasoning and observation skills #1, #2 and #3 are attainable with time or in theory could be taught. However #4 and #5 are either in you or they are not. If they are not, then you cannot win over the long term regardless.
There is only one prerequisite for successful trading - working method. Everything else is imho wishful thinking or just theorizing.
If you have a Trading Plan, then no such thing as High probability trade, why would you take anything less than high probability trades? I think your #3 is my number One. I think #4 and 5 can be learned eventually. Toughest which eventually becomes most boring is doing the same thing everyday. But you get it down to boring, you should be profitable.
Trading is kind of like a combination...of alchemy and sorcery -- I hope that doesn't make me sound weird. For every point, there is an equal...just as right...counterpoint. Each trading day is a different, unique, combination of art and science. A great trader understand this; understands the two opposing fighting forces. Almost has a 6'th sense, intuition for how the market will behave Take the DOW Jones, for example, before the market opens each morning...make a judgement call...on how you think it will behave. -- if you're good at this, you're golden.
I have a rule of thumb when evaluating a trade, ...... very much sorcery and alchemy as L-L wrote above...., but it has worked very well for me over the last 30 years and its this... : "Near-term,.... stocks will always move in the general direction that make the most amount of traders lose the most amount of money". It never fails. And where its really tough to do, is when you too are convinced the herd is right, now thats a tough trade . But it never, or perhaps I should say rarely, fails.
I regognise that there is some ambiguity in the first post. Just to clear things up for ya. I don't imply any order of importance by numbering 1 to 5. To me they are all essential for long term success. By high probability trade, I mean a situation where the odds are in your favour before you enter. You have to be able to recognise it when you see it. I don't think that #4 and #5 can be learned if you just don't have it in you. For example, if you have a gambling problem, forget it.
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