The best traders polish their skills through practice or discipline, they go through self-analyzing in order to see, what drives their trading and help learn how to keep away fear and greed. Even experts may find tips and tricks to help them make smarter and more benefitial deals.
Define your goals and choose an appropriate trading style
Before any trip you an idea of your destination and how to get there. It is very important to keep in mind clear goals and then assure yourself if your trading style can attain these goals. Every style has a different risk profile that requires a certain approach. For example if you can’t seem to sleep with an open position on the market, you should consider day trading. On the other hand, if you have the finances with which you think you can get a profit from a couple of months of trading, you might rather be a position trader. Just make sure that your character suits your trading style in order to stay away from stress and losses.
Choose a broker that offers an appropriate trading platform
Choosing an appropriate broker is very important. You need to know the brokers strategy and how they work in the market. For example trading outside of the stock market or the spot market is different from trading in the stock market. Make sure that your brokers trading platform suits your analysis. For example, if you like to trade with Fibonacci numbers, ensure that the platform is able to draw Fibonacci lines. A good broker with a bad platform or a bad broker with a good platform can become a problem. Either way, make sure you get the best of both.
Choose a method and be consistent
Before you enter the market as a trader, you need somewhat of a vision of how you will be making desicions in order to execute your trades. You have to know what kind of information you need to make proper decisions when entering or exiting the trades. Some people look at essential economical data and charts to make sure of the best time to execute trades. Others use only technical analysis. Whichever way you choose, be consistent and make sure your method is adaptable. Your method should be able to keep up with the markets changing dynamics.
Carefully choose your schedule to enter and exit trades
A lot of traders get confused because of conflicting information that they see when watching charts in different schedules. What seems as a buying opportunity in a weekly chart, may actually be a selling signal in a daily chart. With that being said, if you take you main trading course from a weekly chart and you use the daily chart to time your entering, you should synchronize those two.
Calculate your expectancy
Expectancy is a formula you use to figure out, how trustworthy your system is. You should go back in time and measure all your trades that were winners VS losers. Next determine how beneficial your winning trades were VS how much your losing trades lost. Take a look at ten of you last trades. Determine, whether you were making a gain or a loss. Write out those results. Add up your winning trades and divide that by the winning trades sum. Here’s the formula:
Example: If you made 10 trades, of which 6 were winning and 4 were losing, your winning ratio percent would be 6/10 or 60%. If your 6 trades made you 2400 euros, your average winning would be 2400/6 = 400 euros. If your losses were 1200 euros, your average loss would be 1200/4 = 300 euros. Apply these results to the formula and you get: E = [1 + (400/300)] x 0.6 – 1 = 0.40 or 40%. A positive 40% expectancy means your system will make a long-time profit of 40 cents from one euro.
Focus on your trades and learn to love small losses
If you have financed your account, it is important to remember that your money is at risk. For that reason this money should not be the money you need in order to cover regular living expenses. Think of your trading money as vacation money. If the vacation is over, your money is spent. Take trading the same way, because that mentally prepares you to accept small losses that are key when managing risk. By focusing on your trades and accepting small losses, you will be much more successful.
Create positive feedback loops
A positive feedback loop is created by executing your trades well according to your plan. If you plan and execute a trade well, it makes a positive feedback pattern. Success brings success which in turn bring trust, especially if the trade was profitable. Even if you make a small loss, but you do it according to a planned trade, you are creating a positive feedback loop.
Make a weekend analysis
In the weekend when markets are closed, learn weekly charts to find patterns or news that could affect your trades. Maybe a pattern will make a double top and experts and news will refer to a market reversal. In the light of objectivity you make your best plans. Learn to be patient.
Keep a written documentation
A typed document is a good learning resource. Print a graph and write up all the reasons and main basis of what affect your decisions. Mark your enters and exits in the diagram. Make relevant comments, also emotional reasonings. Did you panic? Did you get emotional? Were you too greedy or restless? Only when you can objectively look at your trades, you can develop a mental control and discipline in order to make trades based on your system not relying on your habits or emotions.
The steps above will take you to an approach that is more structured and should help you become a better trader. Trading is a form of art and the only way to get better at it is through persistent and disciplined practice.