Michael Gouvalaris’ trade secrets
It’s common knowledge that exchanging their experience helps people achieve new professional heights. The experience of those who have been very successful in their field is particularly valuable. Reminiscences and tips from a seasoned US trader and investment consultant Michael Gouvalaris will definitely be of interest to anyone who is striving to get ahead in stock trading.
The market punishes the overly confident
Today Michael is a fairly well known personality in the United States. However, his road to success, partially described in his The Trading Playbook ,was fairly bumpy. Michael became interested in trading back when he was a student: when doing an assignment on economics, young Michael got interested in price movement charts. He started looking for recurring trends, pondering the nature and reasons behind the price moves – a hobby that became a major part of his life.
Gouvalaris says it took years of mistakes and failures to work his way from initial transactions to professional excellence. Looking back, Michael says that being overly confident was his biggest mistake. “Never ever go for the average – never add to a losing position,” he writes in his book. “After some initial success, I became overly confident, thinking I could never lose. One time, I wound up averaging so much that almost all of my deposit was invested into one intra-day trade... As a result, the loss on that day equaled all the profit I had made in the previous year, and there was little left of my deposit.”
Curiously, this is the moment Gouvalaris considers pivotal: that’s when he started taking trading seriously. For example, Michael always followed the original plan when doing intra-day trading. “I finally realized that I had to think probabilities, not certainties. I removed all the indicators and oscillators and focused on the price instead – this is what carries the most important information for a speculator,” Michael says.
Manage your emotions
What is the perfect trader like? What is the difference between a professional and a novice trader? Michael believes a professional must be able to control his/her emotions: “You have to forget the past in order to achieve success in the future.” A good trader must also come to terms with the fact that in trading there could never be 100%, “sure shot” guarantees. Profits come to those able to find deals with highly likely profits – while remembering proper risk management. And if the strategy your chose didn’t work out – don’t be stubborn and “try to prove to the market that you’re right.”
On the whole, discipline and risk management are the two things of paramount importance in professional trading: “If you follow your thought-out and successfully tested strategy, without letting emotions get you off track, you are bound to eventually make a profit.”
For the novice’s information
The seasoned pro’s advice to novice traders goes like this: start small and grow your positions gradually. This way you can adapt psychologically. If you feel ill at ease, perhaps you should reduce the transaction amounts. Among other things, this strategy will help you avoid many margin calls so typical of reckless newbies.
Bigger is not always mean better. This applies to the instruments you use in trading as well: dozens of indicators are likely to distract you from the real picture. “Leave just one or two indicators – and watch your understanding of the market rapidly improve,” Michael recommends. The master believes it is more important to avoid mistakes than to try and catch all profitable trades. Even minor mistakes can obliterate all the profits you’ve already made.
You have to approach trading responsibly – mistakes are costly. But this is one of the few professions, according to Michael Gouvalaris, where the person becomes the master of his own fate. Besides, in trading “it doesn’t matter what happened to you during your last trade – there will be infinitely plenty of other opportunities!” With the right capital management, this gives us infinite opportunities to earn money!