In this article, I will share a few tips and tricks that I have used in the past to become a profitable trader. While trading can be simple, that doesn’t mean that it is going to be easy. After all, there is a major difference between trading a demo account and trading a real account. When there is money on the line, a lot of people shit themselves.
Don’t try to overcomplicate your trades. Stick to simple strategies and stick with them.
Create a trading plan.
Creating a trading plan is essential before entering the Forex market. This will help you determine your entry and exit points, how much you are willing to risk, what type of analysis you will be using, and so on. It will also help keep you disciplined when trading.
I know you believe that there is a magic system that I should be sharing with you, but the reality is that there is no major secret to be shared. If you test a system and it makes more than it loses, congratulations…you are now in the top ten percent of the trading public, assuming you execute the system correctly.
Risk to reward ratios are nonsense.
Many people try to use risk to reward ratios as a way of determining whether or not a trade is worth taking. The reality is that the market can move in any direction, and no one can predict where it will go. Risk to reward ratios should be used for planning purposes, not as a means of predicting the outcome of a trade.
Be patient and wait for the right opportunity to enter the market.
The biggest issue I have with using these calculations is that if you are trying for 1:3, what happens when the market keeps going? It is the height of hubris to think you “know where the market is going.” The truth is that you shouldn’t be looking to limit your gains.
Always add to winners if you can.
Adding to a winning position is one of the most effective ways to increase your trading profits. By adding more contracts or shares to a position that is already in profit, you can increase your potential gains with minimal risk. This strategy should only be used when you are sure that the trend will continue, and you have sufficient capital to cover any losses.
In other words, don’t add recklessly. However, if you are in profit and the momentum is still there, you can add partial positions to your trade. Trading is difficult at times, and we need to take advantage of it when we are correct. A huge win can cover a lot of sins.
Don’t be afraid to change directions in a trade if your a proven wrong.
No one is perfect, and everyone makes mistakes in the market. If you enter a trade that turns out to be wrong, don’t be afraid to change directions and close out the position. There’s nothing wrong with being wrong and there is no rule that says you have to stick it out until the bitter end. Sometimes, it pays to take your loss and move on.
Of particular interest to me is when the momentum is increasing against me. I don’t hesitate to get out, and them trade in the other direction. Let the market tell you where it wants to go. Analysis isn’t worth shit if you aren’t paying attention to what the markets are trying to say. It doesn’t need to make sense, because numbers don’t lie. That stock or currency you hate, and think should collapse? The price keeps rising, so whether or not you are “correct” is no longer a question. Numbers matter, narratives don’t.
Don’t sweat the game. Trading isn’t life.
Trading can be an emotional roller coaster. It is easy to get wrapped up in the moment and let your emotions take over. Remember that, in the end, trading is just a game. Don’t let it become your life and remember to enjoy yourself during the process.
I know this sounds strange coming from someone who has made their living trading and working in the industry, but in the end – its just a tool. Its like any other job, although I happen to love it. Make sure you do as well, but there is always something more important. Unfortunately, there are too many of our brothers and sisters that don’t see that and let the emotional game get to them.
Notice there is no direct trading advice in this post.
That is because I do not feel it is appropriate to give trading advice. Everyone has different risk tolerances and strategies, so what works for me may not work for you. Instead, I wanted to provide some general tips that can help any trader, regardless of experience level or strategy. Remember – trading is difficult, but it doesn’t have to be complicated.
Oh, and then there is that bit that trading is something like 90 percent psychological. Any idiot can read a chart. Trust me, I know. I get paid to do it for a living.