If I could turn back time, here are the top 7 tips I could have followed when I first started trading.
Don't take failure personally
How do you feel when the market hits your stop loss? What if you have 5 losing trades in a row? How about if the market hit your stop loss and then reversed at the same time?
Now, if any of the above happens to you, then you can:
- Blame the market for hitting your stops on purpose.
- Blame your broker for chasing your stops.
- Blame big players for market manipulation.
But think about it, does it make sense?
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The market doesn't care about you
Thousands of "players" and billions of dollars pass through the financial markets every day.
The market has no incentive to intentionally hurt you because it doesn't care about you (or to put it more directly, it doesn't even know you exist). So stop thinking that the market wants to take your stops because you are just plankton in the financial ocean.
The broker has no incentive to hunt for your stop loss. For a regulated broker that has been in business for many years, there is no incentive to hit your stop loss on purpose . Why? Because in this case, the broker risks losing a client for life. And with the help of social media and forums, it can damage the broker's reputation and can easily put them out of business.
From a risk/reward point of view, it is not profitable for a broker to track down your stop loss.
Does this mean that the broker will not hunt for your stop loss?
No, however this can easily happen to shady brokers who are short term. However, this is unlikely to happen to a reputable broker who has been in business for many years.
The market is built on manipulation, and this is the essence of business
Yes, the financial markets are against you.
Those with deep pockets can “temporarily” move the market to activate stop losses and option expiration levels.
In my opinion you have 2 options.
- You can blame the market itself, but that will get you nowhere except more losses and disappointments.
- Or you can learn how the market is manipulated and profit from it.
The choice is yours.
Don't Tell Anyone You Trade
You are probably wondering, “Why can’t I tell my friends or family that I am a trader?” Well, if you are a consistently profitable trader, then go ahead. There is no problem with this. If not, then it would be better not to talk about it.
This is because when you tell your friend that you are a trader, the first question you will ask will be: "Do you make money trading?" Your answer will probably be no. And you won't feel good because you'll be reminded of your losses and how incompetent you are as yet.
The next time you meet your friend again, guess what is the first question he will ask you? “Did you manage to make money on trading?” Again, your answer will be no, and you will feel terrible about it. Now the next time you meet your friend, guess what question he will ask you? You understood my point of view.
Therefore, to avoid this "trauma", do not tell anyone about your trading activities - not even your family.
Start Small
If you can afford to lose $100,000 without it affecting your lifestyle, how much should you fund your trading account? $100,000? Incorrect answer.
This is because when you first start trading, your results will be the worst.
You will make trading mistakes, get emotional, and do things that damage your deposit, such as averaging your losses, increasing your stop loss, etc.
This means that your $100,000 won't last long. Solution? Start with a small trading account. This way, your mistakes will not be costly and even if you lose everything, you will still have money left to fund another trading account.
Because, no matter what, you have to pay for tuition in the market. The only question is, do you want to pay more or less?
Be a master of risk management
Risk management provides safeguards for your trading account so that you never lose everything, even if you have 10 losses in a row. This is one of the easiest things to learn and will pay dividends even after decades of your trading career.
So how do you apply risk management to your trading?
Here are a few things to follow:
- Know exactly when to get out if you make a mistake.
- Do not lose more than 1% of your trading capital.
Let me explain.
Know when to get out if you're wrong
Before opening a trade, you must know where to exit if you make a mistake. This could be a stop loss level, a temporary stop loss, etc. Whatever method you use, you must have a plan to get out of a losing trade or your account will lose money day in and day out.
Do not lose more than 1% of your trading capital
So the exit plan is the first step. But if you set the wrong position size, your account can still be destroyed when the stop loss is triggered. How can this be avoided?
The key here is to limit your losses to only a fraction of your trading capital, even if the market goes against you. To do this, you must know your stop loss level and calculate the appropriate position size for it.
Stop loss and position size go hand in hand.
- When you increase your stop loss, decrease your position size.
- By decreasing the stop loss size, you can increase the size of your position.
Learn everything you can about trading
As a beginner trader, there is still a lot you don't know. So don't focus on one technique or strategy too hard because it might not work for you.
Instead, explore all available options.
Things like day trading , swing trading , RSI , MACD , stochastic , moving average , counter trend trading, trend following, etc.
Also, not all trading tools that you learn will be useful to you.
A moving average is a trend following indicator. This indicator works by calculating the average price for a certain period and is displayed as a line on the chart. You can use the moving average to track your stop loss, define a value area, and filter out trending market conditions.
As you learn about the various tools, you will be able to choose the ones that suit your needs rather than blindly using them.
In the end, you will realize that 90% of what you have learned will be useless to you. However, if you focus on 10%, it will be enough to become a successful trader.
Decide if trading is right for you
Not everyone can become a trader. Just like not everyone can be a doctor, lawyer, engineer, etc. Therefore, if at some point you feel that trading is not for you, then the wisest thing to do would be to leave it.
Yes, you could lose the time, effort and money you invested in trading. But the worst thing is to put even more resources into it, knowing that trading is not for you.
There is no shame in quitting doing something that doesn't suit you. Winners try new things all the time until they find their calling and go for broke. If trading is not for you, then you have not found your calling. And there is nothing to be ashamed of.
Don't quit your job
Let me share a real story with you. I knew one trader who had just started trading.
At first, he was very lucky he was able to make a profit of $ 1,000 after several transactions. Then he thought, "If I can make $1,000 trading part time, then I'll make even more money trading full time."
So he quit his job to trade full time. The first few days were good as he consistently made profits in the markets. Then the market reversed and a losing streak began. In the end, he gave away all the profits he made and bled his trading account.
Then he had to return to the labor market again in search of work. So what's the lesson? Never quit your job. Just because you've made some money in the financial markets doesn't mean you can do it all the time - it could just be newbie luck.