Stock traders are a mysterious bunch. Not quite gamblers. Not quite extortionists. Yet the good ones posses the finest, some would argue the worst, qualities of both. A good stock trader does not buy and sell stocks with the same mentality as someone blowing their hard earned money at a casino table... but they do take large risks. A stock trader who consistently takes generous amounts of money out of the market does not calculate their next move the same as an extortionist would… but they are in the game to take money from those on the other side of the trade. Serious stock traders are not hobbyists, and they are certainly not criminals. A good stock trader is an educated professional in a "potentially" very lucrative business. On the surface, trading stocks looks like easy money from those on the outside looking in. A trader buys 10,000 shares of XYZ, inc. at $8.50 per share – then sells it for $9.20 per share two hours later. Some people see that as making $7,000 in two hours without doing any “real” work… easy money… on the verge of scamming. But not so. Good traders must have nerves of steel and be able to control their emotions at all times. If you put yourself in the position of that trader who made $7,000 in two hours you will see what I mean. Let’s walk it through...

If you buy 10,000 shares of a stock at $8.50 per share, you are laying down $85,000 out of your personal account. Sweating yet? In the case above the stock price rose 70 cents in two hours… which is really good. Now lets say that 10 minutes after that trader bought that stock, the price dipped to $8.40. That’s a loss of $1,000 in 10 minutes. Would you hold onto the stock, or panic and sell it right away to keep from losing even more money? The trader above held on, and sure enough it went back up to $8.50 in a short time… then continued to go up until the trader sold it at a 70 cent profit per share. If the trader would have allowed their emotions to dictate their actions, and they would have sold when they started losing money, they would have been out $1,000. The constant up and down wave of stock prices is normal and it happens all day, every day, on every stock. And sometimes, a stock will dip down and stay down... forcing the trader to take a loss. A typical trader can profit $5,000 one day and lose $10,000 the next day. It’s a nerve-wracking business that is definitely not for everyone. A stock trader must keep their emotions in check or they will certainly lose all of their money very, very quickly.

Now of course traders don’t just go out there and start buying stocks willy-nilly. There is a lot of preparation involved before any money is laid down. The stock market opens at 9:30AM Eastern time and closes at 4:00PM. But good stock traders work much more than 6 1/2 hours per day. Many stock traders are up working as early as 5:00AM. What are they doing at that time of day? They are doing several things:
1. Going over their previous day’s trades... what worked/what didn’t, and keeping a journal of "lessons learned"
2. They are watching CNBC on TV and finding out what the stock analysts are predicting for the day.
3. They are checking websites for the latest stock market news.
4. They are studying stock charts of several stocks that are on their watch list.
5. They scan that day’s 'Investors Business Daily' newspaper for stocks that may be hot that day.
6. They put all that information together and come up with a "trading plan" for the day.

After they have created their trading plan, good stock traders stick to the plan. If Google stock starts soaring, but it isn’t on their plan – they don’t buy it. They stick to the plan. There is a saying among traders; "plan the trades, and trade the plan." A good trader never buys a stock that they haven’t researched in the off hours first.

Most good traders work between 10 and 14 hours per day. One very successful trader/fund manager used to arrive at his office at 4:30AM and go home around 11:00PM. It takes a lot of work to be a successful stock trader... it isn’t easy money. In fact it isn’t really about making money at all. It’s about making good trades... then the money follows.

The mind of a good trader is dedicated to hard work and driven to constantly improve their trades. Most good traders have an obsession with the financial markets, and even though they are working many hours per day, they just can’t get enough. Above all, good traders do not trade on emotion... they "trade the plan."

More to come soon on how to create the trading plan.

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