A lot of people who want to learn about becoming profitable traders only need to spend just a few minutes online before reading phrases such as “Keep your losses to a minimum” and “plan your trade.” For a lot of new traders, these insignificant bits of information will probably be more of a distraction than useful advice. New traders just want to know how to set up their charts for the first time so they can hurry up with money-making.
We have made a list of the most important trading tips so make sure you read all of them until the end.
1. Always have a trading plan
A trading plan is a set of written rules that specifies a trader’s money management, entry and exit criteria. Using a trading plan allows traders to do this even though it is a pretty time-consuming activity. With today’s technology, it is easy enough to test your trading idea before risking any real money. This is usually known as backtesting. This practice uses trading ideas to historical data, which allows traders to determine if their trading plan is viable and also shows the possible results of the plan’s logic. Once the plan has been created and the backtesting shows good results then the plan can be used with real money. It is very important that you stick with your plan. Making trades outside of your trade plan is considered to be poor trading.
2. Tread trading like a business
If you want to be successful you need to think of trading as a full-time business not just as a job or a hobby. If you do not make a real commitment to learning how trading works, it can be very expensive. Trading is a business that brings stress, risk, taxes, losses, and expenses. As a trader, you are basically a small business owner and you have to do your research and strategize to make the best out of your business’ potential.
3. Use technology to your advantage
Trading is a very competitive business and you should always assume that the person on the other side trading is probably taking full advantage of available technology. Charting platforms allow traders hundreds of methods for analyzing and viewing the markets. Getting constant updates of the market on your smartphones allows you to monitor trades anywhere. Backtesting a trading plan idea on historical data before risking real money can save your trading account, not to mention all the frustration and stress of losing money.
Read more here to learn about the market exchange.
4. Protect your trading capital
Saving up money to fund your trading account can take a lot of time and a lot of effort. Note that to protect your trading capital does not mean that you can’t have any losing trades. Even the most successful traders have losing trades, this is part of the business. Protecting your trading capital means that you should not take any unnecessary risks that may damage your trading account permanently.
5. Do not risk more than you can afford
Before you start using real cash in trades, it is very important that all the money you have in your trading account is expendable. If it is not, then you should keep saving until it is. Losing money you can’t afford to lose can put you in a hole that you can never dig out from.