I’m sure you’ve often heard that trading is a pretty aggressive environment, where few can make consistent profits. It’s hard to argue with that. And to get on the same level as successful traders, all you need to do is learn their trading strategy. As a rule, the key to success is not only to follow the trading rules unconditionally but also to use some special techniques of successful traders that will help you manage your emotions, follow discipline in trading and avoid unexpected losses.
Trading is not about finding a good entry and exit point. Success comes from the way we think, the level of emotional intelligence we possess, and how seriously we take money management.
Do you trade for business or just for fun?
After watching many interviews with famous traders and reading many articles, I decided to make a small TOP 10 list of tricks (or tips) of successful traders that should help you change your mindset. Whatever your trading strategy, these rules will work the same way.
The biggest fear of beginners is making a loss. This fear prevents us from placing stops in the hope that the price will turn around and go where we want it to go. Beginners do not understand that a series of losing trades closed with stop losses can be compensated by a successful trade with a good risk/reward ratio within the framework of risk management. For some people 5 stops in a row is a disaster, for others, it’s just an experience. It all depends on your perception of loss. Try to treat losses as something unavoidable, but at the same time so that they do not become a psychological burden.
Before every trade, ask yourself: does it follow your rules for entering the financial market? It is better to skip the trade if:
I think that more than once, after a series of losing trades, you have found yourself thinking that such a losing streak cannot last forever and that you can therefore enter with a larger amount of money than usual and thus make up for all your previous losses in one trade. But the problem is that the principles of planning do not work here, and none of the trades has anything to do with the previous one. And a series of 5 bad trades can just as easily turn into a series of 10 or more. But the losses from overestimating risk will be much greater.
So, paradoxically, when the market is going badly, you should reduce the number of trades and the size of your position. Ideally, it is better not to trade at all and wait for the market situation to become clear to you.
If you don’t know what to do - do nothing!
This rule follows from the previous point. If you have solid capital and even a small profit of around 5%-10% per month, you can live comfortably. But what if you have lost money for 3 months in a row? You will either have to cut your expenses significantly or “pinch” your capital.
Ideally, the most favorable conditions for trading are closed life needs, and stable additional sources of income (investments, business, or hired employment). Personally, I have admired the revelations of some traders who traded and had accounts of hundreds of thousands of dollars, but kept their jobs, even if their salary was modest.
Do not stupidly try to repeat trades after someone else. For the creator of the signal, the amount of the trade may be small, but for you, this risk will cause the strongest emotions, which in the end may have a negative impact on your decisions. I explained how to deal with the risks earlier in this article “Risk Management in Trading: How to Protect Your Finances”.
Public news becomes obsolete the second it is published. News that everyone knows will not give you a personal advantage. Traders who know the news in advance have already analyzed it and taken a position. And it is quite possible that there is already a “giveaway” to the happy crowd as volatility increases. So, avoid trading based on the news. And remember that market analysis may not work well in times of high volatility.
No matter how mentally tough a person is, it’s hard to stay focused on something day in and day out. Add to this the “emotional swings” that a scalper is exposed to due to the ever-changing situation in the financial markets, and it becomes clear that long-term trading at such a pace can seriously undermine one’s health and even worsen relationships with close people.
However, no one is saying that short-term trading is bad. You can trade 5-minute charts and even 1-minute charts. But you should try to organize your work so that you don’t spend all your free time in front of the screen. In the article “How to trade intraday. Scalping” you can find some tips and tools for intraday trading.
Fight your greed. Overly high expectations can lead to significant losses. To avoid this, use partial limiting and move stop losses to breakeven or guaranteed profits. Of course, such decisions should not be based on intuition, but on market logic.
If the price is rising with high volume and not going in your direction, it may be better not to wait for a full stop, but to exit earlier with a smaller loss. Of course, the price may turn around, but this tip can still save your finances in the long run.
Sooner or later in a trader’s career, there will come a time when an asset you have bought will go through the roof and make you ten times more money than you expected. But don’t be under the illusion that this is the result of your analysis. You should treat it with the understanding that life is a series of coincidences, and this time luck is smiling on you. But this is no reason to change your strategy immediately, to overestimate the risks. It is just a nice bonus, a “premium” and nothing more.
When we look at experienced traders, we expect to find a secret that will allow us to make a stable profit from the market. But there are no such secrets, and there cannot be. Instead, there are basic principles that must be followed in order to, at a minimum, not lose your deposit and, at a maximum, gradually increase it.
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In the article, we analyze the concept of volatility analysis and its use in trading. Volatility allows you to evaluate how justified the entry is, the optimal distance to the stop, and also estimate possible targets.