Whether you are an experienced trader or not, we all have to start somewhere. Many reading this article may well be more experienced than the last but all readers will have something in common. What they wish they knew sooner about trading and how this can be used to their advantage…
This article will highlight some key areas of how to start or even enhance your approach to trading and provide the reader with some useful tips to adopt in planning trading strategy.
This piece lists 5 nuggets of knowledge you wish you knew when you started trading.
Try and forget about the money and start with small deposits and lot sizes. Prove you can trade first before you start putting in vast swathes of capital into a trading account. This helps reduce the pressure that money brings.
Starting with a large trading account balance relative to your net worth, traders will feel the pressure when a trade is going their way and vice versa. Traders will feel the pressure when markets move the other way or work against you, creating a fear of losing money in a trade.
New traders should focus on refining their craft and skill as opposed to looking at trading from a purely profitable perspective. Small positions sizes do not have to continue forever and traders will have a feel of when to ramp up the volume size.
Traders will feel it when they have felt they have made a good progression and are confident enough to start depositing higher amounts and increasing trade volume. Consistency will be more apparent, there will be reduced ‘overtrading’, losses may come in but they are now being capped off early as to ‘limit losses’ and you start to pick the right trades to be involved in.
The key take away here is that reducing position and investment size will help relieve pressure and give you more of a relaxed environment to learn to trade successfully. Start small and build on existing knowledge and experience.
Focus on RISK
Risk management is an absolutely critical skill to have to trade successfully. Many traders can get wrapped up in the size of the account balance itself as opposed to a group of trades.
Traders can have the best set up in the world but if the risk management is severely lacking from a trader, then an account balance will meet an inevitable end. Managing risk is massively underrated in terms of trading towards success. Without a 100% foolproof trading system, without the right approach to risk management, a trader is at real risk of blowing up.
Understanding the worst-case scenario would be a good way to start managing risk and understanding that risk in particular. Traders should consider the size of a position they are opening on a trade. Then work out how many trades may be opened per week and then per month to give a snapshot for the month of what the maximum potential loss could be. This could even go into a yearly figure. From there, traders can ask themselves ‘’Am I comfortable with that loss?’’
Focusing on risk can also translate into the type of trades we leave open and identifying the genuine risk in a trade. For example:
- Am I holding a stock overnight that I shouldn’t have overnight?
- Am I waiting for some news to come out surrounding a stock?
- Have I put in appropriate SL and TP?
Risk management is crucial to laying a solid foundation for ongoing trade success. Managing risk effectively will help traders stay in control of their account balances, finances, emotions and help keep a handle on when to close out trades at the right time.
Filter out the noise
There is so much information available to us that this can turn from being useful to a hindrance. There is a wealth of materials and media outlets which saturate our screens with a constant stream of interviews, opinions, articles, press releases with new and different information surrounding latest global events and how this can impact markets.
With social media channels, TV, radio, news sites, forums and so much more information available to us that we can often get lost in this sea of info and variety of opinion. We are bombarded with information daily.
What traders should try and do is stick to minimal sources. If you choose to follow one person then fine. But by following more and more people there will inevitably be too much noise going on in a traders head.
Subscribing to one person for trade ideas is not necessarily a bad thing as this will give a trader a clearer outlay of their own opinion. Having too much information going around a traders head at once only means that this information must be filtered through before opening a position.
When there is so much noise, a trader can do themselves a disservice. A trader will have pros and cons for different trades which can ultimately result in a neutral opinion as a result as there is so much noise to filter through.
Too much noise can lead to analysis paralysis and potentially fear of opening a position, manifesting to self-doubt.
Choose a strategy and stick to it!
This leads on nicely from too much noise. A common mistake many traders make is trying to master of all markets opposed to focusing and honing skill on one particular trade style or market.
Sticking to one market can help with research. Beginner traders, as well as more experienced traders, may find it difficult to keep up with ever-changing market news in Crypto, Stocks, Indices and Forex.
By focusing on one market, traders can dedicate more quality time to researching a certain market place. This will also help reduce unnecessary noise.
Traders should decide on a trading style and marketplace. For example, scalping in Cryptocurrencies. A new trader can develop the necessary scalping skills and focus more on technology and Crypto news. This will give a trader a clear direction of where to start.
By choosing one particular strategy and one market, a trader can implement this for a certain period and see how it goes. Adopt the strategy for a month and then learn from the results, analyse the data and look for areas of improvement.
By breaking trading down this way, it gives traders a chance to grow, learn and progress more naturally and with reduced stress - giving traders the confidence to grow and learn.
Expect to be in the game for the long term
Getting rich quick is 99% of the time down to luck and far from realistic.
By incorporating the above points together, starting small, identifying risk, filtering noise and deciding on a strategy, this will give you, as a trader, a solid building base of starting to trade successfully.
A crucial piece of advice is; be patient. Success will not come instantly. Work hard to learn and develop as a trader and success will not be far away.
Start trading your favourite CFD’s including Stocks, Indices, Forex, Cryptocurrencies today.
Risk Warning: CFD and Spot Forex trading both come with a high degree of risk. You must be prepared to sustain a total loss of any funds deposited with us, as well as any additional losses, charges, or other costs we incur in recovering any payment from you. Given the possibility of losing more than your entire investment, speculation in certain investments should only be conducted with risk capital funds that if lost will not significantly affect your personal or institution’s financial well-being. Before deciding to trade the products offered by us, you should carefully consider your objectives, financial situation, needs and level of experience. You should also be aware of all the risks associated with trading on margin.