1. Forget About the Money – Start Small
Probably, someone sensible said to me at the beginning to take it very steady, very small. Prove that you can trade first before you start to put in decent money. I didn’t take it seriously. But this is the kind of thing that you really need to take seriously if you want to do this as a long-term thing and you are not looking to just buy one stock and sell it.
If you are into trading, If you want to make money at this for the long term even though the rest of your life – start small.
One of the reasons is reducing the pressure of money. If you are starting with a big account, relative to your net worth. You are going to feel the pressure when the trade is going your way. You want to take the profits quickly and vice versa, you are gonna feel the pressure when it goes against you.
You need to be refining your craft and your skill rather than looking at it from a profit perspective, so starting small it’s just the biggest possible thing. And, If you want to know when should you start ramping it up, the right time is when you’ve made the good progression.
So, when you’ve got the consistency, the losses are coming as well but you’re capping them off early or letting those runners win and you’re picking the right trades to be in. You’re not overtrading right now, but you will know when it is the time to ramp it up and start to make some money.
Starting small, and looking at it from a different perspective such as I am actually improving a skill here, not looking to make money.
2. Focus on the Risk
This one is very similar, but not the same. Forgetting about the size of the account, just focusing on per trade or per group of trades. This is the biggest thing. If we’re looking from a pure perspective, operations perspective risk – Risk management, it’s massive. You can have the best system in the world but If your risk management is not good, you’re gonna blow up.
Focusing on risk and understanding what is the worst-case scenario is the best way. You can do that by maybe accepting that risk. This is your max loss per trade, You are taking X trader per week, X trades per month, X trades per year. Worst case scenario is that you will lose all of them. Will you be comfortable with that? If the answer is yes, let’s begin the year.
Similar to starting small, but really focusing on the risk and also purely from a perspective of where is the genuine risk of the trade. A lot of people are going to look at the charts and ask themselves where is the hidden risk in it. Are you holding a stock overnight and you shouldn’t be holding it? Are you in something that it could be some news out? Or just understanding the risk, because that is what keeps you in the game.
If you have the capital to play the game and of course the time – you can do this. You just need to keep going until you improved. You need capital and time. A lot of people run out of capital. Not many people keep going and say well I will keep smaller my capital and I can keep going indefinitely until I get this.
This is the biggest part of the game, trade risk, week risk, multiple trade risk, hidden trade risk. Everything is about risk, we are all risk managers and the most important thing is to not lose our capital and the next thing to do is to grow our capital, grow our trading account.
3. Filter out the Noise
There is so much information. So much bombarding with information on TVs, magazines, newspapers, newsletters, emails, gurus, youtube videos, etc. Just get rid of it.
If you want to kind of subscribe to something that gives you informational trade ideas I don’t think that is a problem. But just stick it to one, just keep it one thing that you follow. If you don’t do any, even better.
But when you have so much noise, almost you do get a disservice because you get pros and cons with different trades coming at you. And sometimes you can’t see the signals that are in front of you just because you’ve got all this noise to filter through.
“THE SIGNAL IS THE TRUTH. THE NOISE IS WHAT DISTRACTS US FROM THE TRUTH.” – NATE SILVER
Much more clarity and you can go in with more focus and make your own decision and then just stick to it. Rightly or wrongly, that’s the point in trading. You’re backing up the decision with money.
4. Stick to One Method or Strategy(Market or Group of Markets)
Trying to be master of all trades you can become a master of none.
But that can mean as well, sticking to one market or a group of markets-not too many. You need to decide for example, that you are going be a great day trader scalp of Dax or Dow, that’s it.
Sticking to that, run it for a while, see how you do and analyze your performance. Or maybe you can trade tech stocks on a swing trade basis after earnings. Maybe even going to trade London Stock Exchange insurance stocks pair trading, whatever it may be, It doesn’t matter. The point is sticking to one method and just sticking out for a long period of time.
This is definitely a big one there, a massive mistake that I see people make in trading.
So, If you want to be FX trader, focus on the trades that you feel you want to focus on, stick to that and timeframe wise.
5. Be in the Game for the Long Term
Expect to be in the game for the long term. Getting rich quick doesn’t exist. And If it does it’s luck. Very few people come into the game and instantly can pick it up straight away.
Yes, there is always going to be that one, or two that are always out of lines, the normal distribution curve.
But expect to be in there for the long term. And If you think about that in the back of your mind, that will help you put all of these tips into perspective.
If you are expecting to be In this trading game for the long term, it makes sense to start small, you need to focus on the risk because again you want to be here and there is no point for you to overdo the risk. You want to have your own method, your own strategy. You don’t want to be relying on other people, so yes you are going to filter the noise and have one newsletter or something else that you look at and learn from.
If you take this 5 things seriously, the learning curve will potentially go from many years to a very short period of time.