In 12 days’ time another year would have gone by and you will be wondering how your trading went in 2015. Trading is a life long journey so you can improve every year but you need to take stock at different points of your career to see reflect on your journey so far. Perhaps in 2015 you have made the same mistakes as 2014, so it’s time to take a serious look at your trading progress.
Don’t worry – trading is something you can always improve on. Below I am going to outline 5 steps you can take to improve your trading significantly and give you a peace of mind on how to trade.
1. GET A REALITY CHECK AND STOP LISTENING TO PROSPERITY FOREX
You need to stop thinking about being a full time trader immediately. Yes, listen to me and hold on to your full time job and trade part time first. You can still trade like a professional trader but it doesn’t mean you need to quit your job.
Being a full time trader requires considerable capital which you have to build up over time. This is something you can aspire towards reaching, BUT IT IS NOT GOING TO HAPPEN OVERNIGHT. In fact it may take 5 to 10 years to get there. It is possible to get there, but it takes time.
So what about all the advertisements that promises to make you a millionaire by next year? Or how they converted their 10,000 account into 300,000 in a year? Are they the real genius traders?
Let me tell you that the only way they make money is by selling lies to unsuspecting traders like yourself. It is sad to see people pumping in $5000 into such courses and then another $5000 into trading hoping to make a million and only to see their account going bust within a matter of months.
ACTION 1: Aim for 10-20% returns per year. This is still better than keeping your money in the bank. This is very much achievable, but it won’t be much. At least you are not losing your money to unscrupulous educators.
2. ALWAYS PUT A STOP LOSS
Our human egos hate being told that they are wrong. We are brought up in school to get 100% for our English paper. We apply the same principle to trading and always want to get 100% correct in our trades. Therefore we either do not put a stop loss or keep shifting our stop loss so that we do not take a hit on our account.
When I started trading, I used to get 10 trades correct in a row because I never put a stop loss. It was an amazing feeling and also pumped up my ego as you get the GOD like feeling. However there was one day when a trade went completely went against me and destroyed my entire account. I wanted to give up my trading but thankfully kept going to become a much better trader than when I started.
ACTION 2: Always use a stop loss with a fixed percentage of your account size (1%). This means you need to lose 100 trades in a row to wipe out your account. This will never ever happen! Therefore you will never wipe out an account ever again if you follow this action.
I am now quite immunized to losing 3-4 trades in a row. Do I hate losing? Obviously, I am human and don’t want to lose my hard earned money. However I know it is for the greater good. I do not risk more than 1% per trade and this allows me to sleep better at night.
3. TRADING STRATEGIES WITH 30-40% SUCCESS RATE CAN MAKE YOU MONEY
Please keep reading as the above point may sound crazy to you. How can you make money when you lose 70% of your trades? There are 3 key ingredients to this:
- Fixed stop loss (1%)
- Riding your winners (5-6% per trade)
- Loads of patience
- Very simply put, let’s say you lose the first 7 trades in a row and now you are down 7%. (Not the end of the road)
The next trade you win 4%. The next gets you 2% and the final one gets 5%. You have made a total of 11% and you are up 4% for that month. You have just won 30% of your trades and yet you are 4% up.
Most traders will not last through those first 7 losses. They will curse the trading system and go and look for the next best thing in the market. The same mistake is repeated and very soon they will quit trading.
ACTION 3: Understand the success rate of a trading system. Understand how many consecutive losses such a strategy can incur. Adjust your mind to the worst case scenario and start trading so that you are not disappointed.
4. STICK WITH A TRADING STRATEGY FOR AT LEAST 1 YEAR
Newbie traders are so impatient to make their first million. They also expect the market to be their slave and generate money for them every time they place a trade. When this dream is shattered they move into a different trading strategy or look for a robot to trade for them within a few weeks.
Most trading strategies are good provided it is coupled with solid risk control. However since traders do not understand that losses are a part of trading, they get disheartened very quickly.
ACTION 4: Tell yourself that you don’t own the market. You also need to find a good strategy and stick with it for at least a year. Make sure you document your progress and make a determination if this is the method for you. Do not use different trading strategies as you will not be able to figure out where you are going wrong if things go south.
5. GET A GOOD EDUCATION PARTNER TO HONE YOUR TRADING SKILLS
The Forex industry has so many con artists that deserve to be jailed for the way they deceive people with their marketing and false promises. It is very easy to manipulate trading statements and show a track record that isn’t what it should be. However newbie traders flock to such educators in the hope of making a million overnight and end up poorer than they were before.
- Find an education partner that tells you what real trading is all about. Avoid these kinds of educators:
- Those that show their account multiplying a few fold with a short span of time
- Their track record does not have any losses
- Their presentation starts by showing their lavish lifestyle that resembles the Kardashians
- They promote a robot or EA to do the work for you
- They don’t talk about risk control
- Doesn’t have any after course support and you have to fend for yourself for the rest of your trading career
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