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| Trading forex and stocks |
Most people interested in knowing how to become successful traders need to spend just a few minutes online before reading phrases such as "Plan your trade"; "Trade your plan" and "Keep your losses to a minimum." For new traders, these narratives of information can seem more distraction than practical advice. Often new traders just want to know how to prepare their plans so that they can quickly make money. Each rule is important on its own, but when put together, the effects are strong. Trading with these rules can greatly increase your chances of success in the market.
Rule 1: Always use a trading plan
A trading plan is a written set of rules that define entry and exit criteria and trader management. Using a trading plan allows traders to do this, although it is time-consuming. With the development of technology today, it is easy to test the idea of trading before risking real money. This practice, known as a "Demo Account", allows traders to determine whether a trading plan is workable, and it also shows the predicted logic of the plan. Once a plan is developed and the trials show good results, the plan can be used in real trading. The key here is to stick to the plan. Taking trades outside the trading plan, even if it turns profitable, is a bad deal and destroys any expectation that the plan may have.
Rule 2: Dealing with trading like a business
To be successful, one must treat trading as a full or part-time business - not as a hobby or a job. As a hobby, where there is no real commitment to learning, trading can be very costly. As a job, it can be frustrating because there is no regular income. Trading is business and incurs expenses, losses, taxes, uncertainty, stress, and risks. As a trader, you are a small business owner and you should do research and set strategies to maximize your business potential.
Rule 3: Use technology to your advantage
Trading is a competitive activity, and it is safe to assume that the person sitting on the other side of the trade takes full advantage of technology. The graphic platforms provide traders with an infinite variety of market presentation and analysis. Having market updates by using smartphones allows us to monitor trades almost anywhere. Even the technology we take for granted today, such as high-speed internet connections, can dramatically increase trading performance. Using technology to your advantage, and keeping up with available technological developments, can be fun and rewarding in trading.
Rule 4: Protect your business capital
Securing enough money to fund a commercial account can take a long time and a lot of effort. It may be more difficult (or even impossible) next time. However, it is important to note that protecting your commercial capital is not synonymous with not having any losing deals. All traders lose deals; this is part of the business. Capital protection involves avoiding any unnecessary risk and doing everything possible to keep the business going.
Rule 5: Be an incessant learner in the market
Think of it as continuing education - traders need to focus more on learning every day. Given that many concepts hold advance knowledge, it is important to remember that understanding markets, and all its complexities, is a lifelong process.
Difficult search allows traders to know the facts, such as what different economic reports mean. Focus and monitoring allow traders to gain instinct and know the nuances; this is what helps traders understand how these economic reports affect the market they are trading in.
International politics, events and economies - even weather - all have an impact on the markets. The market environment is dynamic. The more traders understand the past and present markets, the better prepared they are to face the future.
Rule 6: Risk only what you can afford to lose
Rule No. 4 indicates that trading account financing can be a lengthy process. Therefore, before a trader can start using real cash, all of the funds in the account must be truly depreciable.
Needless to say, the money in the trading account should not be allocated for study in a children's college or a mortgage payment. Traders should never allow themselves to simply think of “borrowing” money from these other important obligations. One must be prepared to lose all the money allocated to the trading account.
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Rule 7: Develop a trading methodology based on facts
Spending some time developing a sound trading methodology is worth the effort. It may be tempting to believe in easy commercial scams prevailing on the Internet. But facts, not emotions or hope, should inspire a trading plan.
Traders who are not in a hurry to learn usually have a better opportunity to check all the information available online. Keep this in mind: if you are going to start a new career, you will likely need to study at a college or university for at least a year or two before you are eligible to apply for a job in the new field. Learning how to trade requires at least the same amount of time, research and study.
Rule 8: Always use a stop loss
A stop loss is a predetermined amount of risk that a trader is willing to accept in every deal. The stop loss can be either an amount in dollars or a percentage, but in both cases, it limits the trader's loss during trading.
Ignoring the stop loss, even if it leads to a profitable trade, is a bad practice. Exiting with a stop loss, and thus getting a losing deal, is still a good trade if it falls within the rules of the trading plan. Using a preventive stop loss helps ensure that our losses and risks are minimized.
Rule 9: Knowing when to stop trading
There are two reasons to stop trading: an ineffective trading plan, and an ineffective trader.
The ineffective trading plan shows far greater losses than expected in historical tests. Markets may have changed within a particular trading instrument, or the trading plan simply is not working as expected. It may be time to reassess the trading plan, make some changes or start again with a new trading plan. An unsuccessful trading plan is a problem that needs to be resolved. It is not necessarily the end of the business.
The ineffective trader is the one who cannot follow his trading plan. External stress, bad habits and less physical activity can all contribute to this problem. A trader who is not ready for trading should consider taking a break to deal with any personal problems, whether they are health, stress, or anything else that prevents the trader from being effective. After facing any difficulties and challenges, the trader can resume trading.
Rule 10: Maintain trading in perspective
It is important to focus on the big picture when trading. Losing a deal should not surprise us - it's part of the business. Likewise, a profitable deal is just one step on the path to profitable trading. It is the cumulative profit that makes a difference. Once a trader accepts winning and losing as part of the business, the emotions will have less impact on the trading performance. This does not mean that we cannot be enthusiastic about a particularly profitable deal, but we must bear in mind that losing a deal is not far away.
Setting realistic targets is an essential part of keeping trading in perspective. If a trader has a small trading account, he or she should not expect huge returns. The 10% return on a $ 10,000 account is completely different from the 10% return on a $ 1,000,000 trading account. Work with what you have and remain reasonable.
