Don’t be greedy and don’t expect to win on each trade!
Successful trading is a matter of accepting the fact that not all trades close in profit. By using correct portfolio management and correct risk/reward ratios successful trader yield much higher profits than losses, profiting from the market. Don’t be disheartened if a trade doesn’t go the way you planned. Learn from the trade and try to improve your performance.
Lack of a trading plan
Traders can quickly lose their confidence if their trades are not successful. The large floating profit made, may often turn into losses. The key to success is to trade defensively and always know your downside by calculating the risk/loss potential of the trade. Always enter a trade knowing your entry point and two exit points.
Stop losses are not there only for show
Traders often wipe out their accounts due to “wishful thinking”- hoping that their trade is going to head back in the correct direction. Using stop-losses prevents traders from taking hard hits, by providing a safety net, automatically exiting the trade. Traders using correct risk/reward ratio including stop-losses can successfully beat the markets.
Capital preservation
Profits are there for the making, but the real key is not to make money; it is actually keeping it. Hold profitable trades and cut losses quickly. The trick is to move your stop-loss to your entry point as quickly as possible, securing your money, while only risking potential profit. Once the security heads the desired direction shit your stop-loss to lock in profits.
Limiting profits and holding onto losses
This is very common among new traders, and normally results due to the lack of a trading plan. After one or two losing trades, traders often find themselves taking small profits even though the trade could have been a potential huge profit maker. Use stop-losses to eliminate the problem. In addition, do not hesitate on the trade, enter the trade with a pre-determined stop-loss and accept that there is a chance that it might be hit. If you are willing to take the risk and you have reviewed your trading plan, let your plan ride and try to interfere as less as possible.
Know what affects the security that you are trading.
Traders are often blind to the factors behind price movement, solemnly relying on one trading strategy or a set of rules. During economic cycles, securities are affected by various factors, for example Gold’s price is driven by inflation, market panic, crude oil, Dollar movement, gold mining companies, among others. Spend time getting to know these to improve your trading results.
Keep track of your trades
Log your trades and emotions on a day to day basis. Keep records of entry points and strategies. Describe your feeling upon entering the trade and jot down any important events that made you realize something new.
By documenting everything you will be able to learn from your mistakes and look back on them in future.
Match your trading style to your lifestyle
Your choice of a trading style must suit your daily lifestyle. Day trading usually means you will be at your computer for hours at a time. Longer term online trading doesn't require as much attention. As a rule, the shorter the time frame the more intense the trading.
Know when to sell your positions.
Everyone focuses on what and when to get into the trade, yet few ever consider the best time to close it. Floating profits only become real money when you convert them to cash. Don't let your gains disappear due to neglect. Plan ahead and always predetermine a price where you are going to exit or consider exiting the trade.
Enjoy the money that you are making
Traders are often too wrapped up trying to increase the value of their portfolios. Every so often take a breather, and enjoy some life with some of the money that you are making. Come back into the market after taking some time off, you won’t believe what a change it will make.
