Top Tips for Traders
Be disciplined every day in every trade and the market will reward you
It’s not like quitting smoking and having the occasional cigarette, if you are only disciplined on 9 out of 10 trades it will be the 1 undisciplined trade which will really hurt your performance of the day! Do not be stubborn and hold onto a bad trade for too long - recognise a small loss - think of the further losses you have saved yourself from !
Discipline = increased profits
Don’t turn a winner into a loser.
Resist the greed factor - the market has rewarded you by moving in the direction of your position, but you don’t feel satisfied with a small win... so you hold onto the trade in hope of larger profits...then watch the market turn against you - you hesitate - the trade further deteriorates.
No one trade should make or break your performance - opportunity exists all the time in the markets.
Develop your own methods and be consistent
You need a game plan - decide on the market prerequisites that must take place in order for you to place a trade... If your methods work more than half of the time stick with it, do not fall into the trap of constantly changing how you work.
Your biggest loss can’t exceed your biggest win
Keep a record of all your trades within a session - know your biggest winner of the day and do not allow a losing trade to exceed this level. If you do, when you net out you’ll in effect you have a net loss on two trades. This is not good!
You always want to be able to come back and trade the next day
Do not put yourself in a position whereby you are losing more money than you can afford. Place daily limits on your performance, e.g. your daily loss can not exceed £500 - when you reach this level, switch off and walk away. The worst feeling in the world is not being able to come back and trade the next day as you have insufficient equity in your account.
Deadly Sins of Trading
Trading without a plan
You MUST have a trading plan you wouldn't start any other business without a plan why would trading be any different. Make a plan and stick to it.
Do not allow your emotions to influence how you trade, You have a plan and stick to it. If you have let your emotions make you deviate from your plan then maybe it time to close the trade.
Again having a plan is key and having stop losses will help you control your action when things go wrong. All traders suffer losses but one you hit your stop loss it is hit, never chase it.
Not taking your profit
As the saying goes "cut your losses and let your winners run" but this is a dangerous game, If sometime the market gives indication that you should close out before your stop loss this can be a good idea. On the other hand if you are in good profit letting a winning trader "run" could end up putting you on the wrong side. "cut your losses and take you pips".
Rushing into a trade without proper planning and analysis because you have a hunch is unlikely to turn out well and certainly not consistently. Trading is a game for the patience and planning.
Not keeping Track
Successful traders keep records, Keep as much detail as you can targets, entry and exits, time of day, support and resistance levels, daily ranges... The keys to consistent trading if knowledge of markets and understand how and why they move.
Trading is all about money/risk management. Your primary goal is to maintain your account, the longer your do this the more confident you will become. If a very successful hedge fund makes 20% returns, so manage your expectations.
Types of Traders
What Type Of Forex Trader Are You?
- Position Trader
- Swing Trader
- Day Trader
The Position Trader
A position trader are those who hold trades open for several weeks, months or even years. Traders like this involves having detailed knowledge of trading fundamental models. These traders will analyze governmental decisions, interest rates and other economic models. Due to the breadth of factors considered the trade is likly to be in one of the major currencies such a G7 or one of the key emerging markets.
The Swing Trader
A swing trader is someone who holds an open trade for a couple of hours days or sometimes longer. These traders tend not to be able to watch the markets during the day so they will spend a couple of hours analyzing the markets and night to for there trading strategies.
Swing Traders aim to profit from an entry into the market with a view to call a turn in the market.
The Day Trader
A day trader has a short term view, they pick a side for a given market and with close our there position at then end of the day with either a profit or loss. Day traders tend to be influenced by more technical trading patterns and tent to trade more volatile pairs to make profits they also send to use shorter time frame charts 1min, 5min, 15min.
As the name suggest a Day Trader will not hold positions open overnight.
A scalper is a trader that holds his position for a very short period of time, a few seconds upto a few minutes. A scalper makes profit by getting in and out quickly grabbing a few pips profit each time in the most volatile markets G7/G10 and major emerging. This is done during the busiest market times.
Find the style that suits you
Each trading style has its advantages and disadvantages many depending on your personality. For some Scalping is too fast and too stressful for some Position Trading is too slow and requires to much patience.
Find the trading style that suits you and you will find trading much more enjoyable.