Even though you need to look at ratios, charts, and numbers, the truth is that trading is more an art than a science. Although you need to know what you’re doing, only talent can make you succeed.
One of the main secrets of the best traders in the world is actually pretty simple: they are disciplined and experienced. They keep analyzing themselves to understand what is making them trade, and they just learn through experience to keep away from both greed and fear.
The next 5 useful tips are great for both beginners as well as to more experienced traders since they can help them make more profitable trades.
#1: Define Your Goals And Define Your Trading Style Accordingly:
When you decide to start trading, you can’t (or shouldn’t) take some money from your savings account and see where it may take you. Although trading doesn’t need to be complicated or hard, you need to know a few things before you even start. And one of the most important things is for you to define your goals.
One of the problems many people have when they start trading is that they keep saying that their goal is to make money or to be rich. These are not measurable goals. You need to define a realistic goal for yourself or you’ll simply get lost. As soon as you have this one defined, it’s time to choose the trading style you’re going to adopt. Your trading style depends on your risk profile, on the amount you have to trade, as well as on your attitude or personality. While some people just can’t fall asleep knowing they have an open trade on their hands during the night, others just don’t care about it and prefer the long-term trading, where they aren’t concerned with the daily activity.
Make sure that you don’t go against your personality or this might go very wrong for you.
#2: Choose A Methodology And Be Consistent:
Before you decide to become a trader, you should already know what motivates you to buy or sell. While some people prefer to rely on the “real” economy, the fundamentals, others prefer to use solely the charts to determine their entry and exit trades.
While fundamentals are often seen as precious mostly to long-term traders and technical analysis to short-term traders, there’s nothing stopping you from using both. Let’s say that you’re looking at the fundamentals of a company and you believe they are gaining market share, that their sales should increase, and there’s really no competition. So, you’re adopting a fundamental analysis. However, you may take technical analysis to decide the best entry point.
No matter what you decide, there’s no right or wrong here. The only thing that you need to do is to be consistent with your choice while allowing some room for changes since the market is always changing.
#3: The Entry And Exit Time Frames:
Either when you’re looking at a stock, a currency pair, or a commodity, you may get confused if you’re getting the opposite information from different time frame charts. Let’s say that you’re seeing a buying opportunity on the weekly chart but the intraday chart says that it is actually a sell signal. So, what do you do? It depends from where you are basing your trading decisions. If you usually use the weekly chart to make your trading decisions and it is saying that there’s a buying opportunity, just wait for the intraday chart to show you the same to enter the trade.
#4: Small Losses Can Be Great:
When you are trading, you will have wins and you will have losses. That’s a fact. Not even the best trader in the whole world is able to avoid this. It’s just the nature of the market. The better you are prepared for the losses, the most chances you have to succeed.
Just fund your account looking at the money as if you were going to spend it on vacations. As soon as they are over, so is the money. This will help you deal with losses in a better way.
Whenever you have a small loss, don’t get angry or blame the market. Just analyze what you did and learn from your mistakes if you made some. Remember that you were able to turn it into a small loss. It would be a lot worse if you let the trade sank.
#5: Build Up Your Confidence:
When you’re trading, it’s important to have confidence in your skills and abilities. However, how can you be confident if you never traded in your life?
This is something that is gained with time and with positive trades. When you manage to have several wins in a row, your confidence will increase over time.