Tuesday, August 25, 2015
TRADING? HERE ARE 10 THINGS YOU SHOULD CONSIDER
https://www.tradingview.com/chart/EURUSD/cBlHaLuP-Trading-Here-are-10-Things-You-Should-Consider/
1. Trading is not a get rich quick scheme. It is a normal investment that gets traders return on capital.
Have you ever met a trader making double-digit percent return per month on a consistent manner?
Trading professionally with proper money management would likely get you a return of few percents a month. From my personal experience a 3-5 percent return on capital per month is a very realistic number.
So if you’re that kind of person who wants to “make a killing” trading, please reconsider your expectations.
2. You should be well-capitalized. Small accounts will probably burn you.
This point is correlated to the first one. let me illustrate with an example:
Suppose that you have a $30,000 trading account. According to the 3-5 percent return per month rule, that would give you 1000-$1500 return per month, which is a very good number, relatively speaking.
Now let’s assume that you have a $5,000 account, according to the 3-5 percent rule, that would return 150-$250 per month.
In the second example(smaller equity), the return would likely be unsatisfying for someone looking to trade for a living. Would it be for you? Wouldn't you break your money management rules and take more risk to increase that return?
3. Technical Analysis doesn't work all the time.
Assumptions we make will always have a percentage of failure. The main goal is to keep your risk limited, your targets bigger than your risk, looking for consistent profit on the long run.
4. Trading is not about forecasting the market.
Do not try to forecast where markets are headed all the time. What a trader does is wait for the market to GIVE him certain conditions that validate a trade. (Don’t trade under the market rules, trade under your rules.) Do you feel sometimes that you're lost and don’t know what to do? it's probably because of this.
5. Limit your risk.
If you did use stop loss on your trades within the past year, but you didn't and took excessive risk only on one trade, this single trade might wipe out all of the profits you gained through the year.
How many times did you ignore your stop loss convincing yourself that you will close at a better price? It may have worked sometimes, but what if the price goes against you more and more? Are you mentally strong enough and able to close at a bigger loss? You probably won’t, until forced to close on a margin call.
6. Don’t over analyze.
Over analysis and complicating your tools will lead to confusion and is not necessarily efficient.
7. Ignore your bias
Initiating a trade requires technical evidence, three, four or five conditions that occur concurrently.
8. Always use a top-down analysis approach.
Start from the higher time frame to the lower time frame. The higher the time frame the more strong and invulnerable the trend is, and the more strong and invulnerable the support and resistance levels are.
9. Trend-trading increases your chances of success.
Trading setups that occur within the context of the trend tend to have a higher success rate than those against it.
10. Don’t give up when you encounter a losing streak
Yeah it can go up to 10 losing trades… Don’t worry, it’s normal in trading.
1. Trading is not a get rich quick scheme. It is a normal investment that gets traders return on capital.
Have you ever met a trader making double-digit percent return per month on a consistent manner?
Trading professionally with proper money management would likely get you a return of few percents a month. From my personal experience a 3-5 percent return on capital per month is a very realistic number.
So if you’re that kind of person who wants to “make a killing” trading, please reconsider your expectations.
2. You should be well-capitalized. Small accounts will probably burn you.
This point is correlated to the first one. let me illustrate with an example:
Suppose that you have a $30,000 trading account. According to the 3-5 percent return per month rule, that would give you 1000-$1500 return per month, which is a very good number, relatively speaking.
Now let’s assume that you have a $5,000 account, according to the 3-5 percent rule, that would return 150-$250 per month.
In the second example(smaller equity), the return would likely be unsatisfying for someone looking to trade for a living. Would it be for you? Wouldn't you break your money management rules and take more risk to increase that return?
3. Technical Analysis doesn't work all the time.
Assumptions we make will always have a percentage of failure. The main goal is to keep your risk limited, your targets bigger than your risk, looking for consistent profit on the long run.
4. Trading is not about forecasting the market.
Do not try to forecast where markets are headed all the time. What a trader does is wait for the market to GIVE him certain conditions that validate a trade. (Don’t trade under the market rules, trade under your rules.) Do you feel sometimes that you're lost and don’t know what to do? it's probably because of this.
5. Limit your risk.
If you did use stop loss on your trades within the past year, but you didn't and took excessive risk only on one trade, this single trade might wipe out all of the profits you gained through the year.
How many times did you ignore your stop loss convincing yourself that you will close at a better price? It may have worked sometimes, but what if the price goes against you more and more? Are you mentally strong enough and able to close at a bigger loss? You probably won’t, until forced to close on a margin call.
6. Don’t over analyze.
Over analysis and complicating your tools will lead to confusion and is not necessarily efficient.
7. Ignore your bias
Initiating a trade requires technical evidence, three, four or five conditions that occur concurrently.
8. Always use a top-down analysis approach.
Start from the higher time frame to the lower time frame. The higher the time frame the more strong and invulnerable the trend is, and the more strong and invulnerable the support and resistance levels are.
9. Trend-trading increases your chances of success.
Trading setups that occur within the context of the trend tend to have a higher success rate than those against it.
10. Don’t give up when you encounter a losing streak
Yeah it can go up to 10 losing trades… Don’t worry, it’s normal in trading.
10 more things I learned in my short trading career
https://www.tradingview.com/chart/EURUSD/aX3kCqrE-10-more-things-I-learned-in-my-short-trading-career/
1. Go online and connect with other traders, ask the right questions (keyword: right) and talk shop. Joining TradingView is the best decision I made by far since I started trading. Social networks add value and my trading has improved a lot by being exposed to different ways to trade and by being able to see what works and what does not. But never trust a trader at their word; always do your own research.
2. One thing is certain; there will be losing trades. With good money management techniques you give back little profit when the market moves against you and you can accept losing trades as a controllable cost of making yourself available for the winning trades.
3. You cannot control the outcome of a trade. You can only control the setup and the risk you accept.
4. Patience is key. That’s why I (being a day / swing trader) don’t work with daily targets, but rather with monthly targets, to avoid chasing trades and forcing setups that are sub par. Take only good set ups with sufficient confirmation and if you don’t see one: don’t trade.
5. No single system will be right 100% of the time. Build the case for entry, using several kinds of input into your decisions. Go for confluence to increase the edge.
6. Don’t psychologically micro manage your trades, monitoring each candle as it develops. Once stops and targets are clearly defined, let a trade play out. Sometimes stepping away from the screen helps.
7. A trading plan can help you identify whether a series of losses happened due to market conditions or due to trading errors.
8. I look at trading as running a small business with no customers, no suppliers, no psychical stock to maintain, no brick and mortar business space to rent, no government mandated opening hours, no chasing of your payments, no employees to manage and no colleagues to depend upon. What’s not to like?
9. It helps to be a positive person. I don’t mean delusional or overconfident (there are plenty of those), but just positive. Trading is an activity where analysis, risk and stress come together and your trading psychology will be helped greatly if you have a positive disposition.
10. Practise prudent portfolio management where you start small and slowly grow the portfolio step by step by adding more pairs / instruments.
1. Go online and connect with other traders, ask the right questions (keyword: right) and talk shop. Joining TradingView is the best decision I made by far since I started trading. Social networks add value and my trading has improved a lot by being exposed to different ways to trade and by being able to see what works and what does not. But never trust a trader at their word; always do your own research.
2. One thing is certain; there will be losing trades. With good money management techniques you give back little profit when the market moves against you and you can accept losing trades as a controllable cost of making yourself available for the winning trades.
3. You cannot control the outcome of a trade. You can only control the setup and the risk you accept.
4. Patience is key. That’s why I (being a day / swing trader) don’t work with daily targets, but rather with monthly targets, to avoid chasing trades and forcing setups that are sub par. Take only good set ups with sufficient confirmation and if you don’t see one: don’t trade.
5. No single system will be right 100% of the time. Build the case for entry, using several kinds of input into your decisions. Go for confluence to increase the edge.
6. Don’t psychologically micro manage your trades, monitoring each candle as it develops. Once stops and targets are clearly defined, let a trade play out. Sometimes stepping away from the screen helps.
7. A trading plan can help you identify whether a series of losses happened due to market conditions or due to trading errors.
8. I look at trading as running a small business with no customers, no suppliers, no psychical stock to maintain, no brick and mortar business space to rent, no government mandated opening hours, no chasing of your payments, no employees to manage and no colleagues to depend upon. What’s not to like?
9. It helps to be a positive person. I don’t mean delusional or overconfident (there are plenty of those), but just positive. Trading is an activity where analysis, risk and stress come together and your trading psychology will be helped greatly if you have a positive disposition.
10. Practise prudent portfolio management where you start small and slowly grow the portfolio step by step by adding more pairs / instruments.
