A trading plan lets you know how to act in each situation because you will have thought about it before.
There’s nothing worse than making a decision in the heat of the moment. Would a businessman have the idea of creating a business without establishing a business plan beforehand?
Your trade 500 plan should also allow you to set achievable goals. To begin, a beginner must set one goal: not to lose.
Then, if you get there, try to aim for a small goal. If you can reach it, then you can try to aim for a bigger performance. Success is found in regularity.
To become a good trader, strictly follow your trading plan
Stick to it scrupulously! Just because you hear about a new miracle indicator doesn’t mean you need to change your plan. You will often hear about new martingales to win without ever losing. Stick to your plan and forget the dream sellers!
Be careful, beginners will often make the mistake of taking a position without respecting the plans or strategies previously set up because it is more exciting to be in the market than to follow its evolution.
Be rigorous with yourself by respecting your trading plan, every day and over time.
To become a good trader, apply the rules of money management
Some beginners are not shocked by the fact of jeopardizing 15 or 20% of the capital on a transaction. The main rule of money management is simple. You should never risk more than 1 or 2% of your account on a transaction.
Many traders always take fixed amount positions. It’s a big mistake. You have to commit a sum of money in trading according to the market and your capital, not according to your desires.
To become a good trader, avoid scattering yourself
Diversification is a good thing when you are an investor.
But a beginner in trading has an interest in following a single strategy at the start with a very limited investment universe: not to try to trade on the stock market, on the currency market and on the commodities market.
Also avoid investing in a multitude of stocks or currency pairs for example.
Do not seek to revolutionize the world of trading either. It is better to use a good old method that has proven itself over the past decades rather than looking for a new system that would make much more money. The best jams are made in the old jars.
To become a good trader, be careful with leverage
Leverage is a double-edged sword
You will always be very tempted to take big positions to earn a lot of money but will you be really careful when you use your leverage? Generally not.
You will often tend to think only of gains when taking a position. Remember that if you can win for example € 8,000 by taking a position on the market, you can just as quickly see them go up in smoke.
In order to avoid making a mistake, a beginner should never exceed a leverage of 2 or 3, and a seasoned trader should limit himself to 5.
Try to take a small position and double it if you are in the right trend.
To become a good trader, know how to cut losses
Before you can win, learn not to lose
It is essential to always protect your capital with a so-called “stop loss” order. A biker must use a helmet to protect his life, you must also use a stop loss to protect your capital.
Never take a position without a stop loss order, even if you are at your computer watching prices, even if you practice Day Trading.
Place your stop loss before confirming your order
Common mistake: accumulating losing positions without wanting to cut them. As long as the position is open, the loss does not exist (the famous saying “not sold not lost”). Yet a latent loss is beautiful and indeed a very real loss at time T.
It is therefore preferable to quickly cut a losing position. And the sooner the better, because the greater the loss, the more difficult it will be to close the transaction.
To become a good trader, keep your cool
Be patient in order to find the right opportunity and be able to wait until market conditions are favorable for the strategy being applied.
You should not be overwhelmed by your emotions, but neither should you ignore them. Knowing how to manage your emotions is one of the keys to success for a trader.