As we mentioned in our previous article in the investment psychology series, trading is more of a psychological game than a strategic one. Once you have mastered the psychological calmness that trading requires, you will be amazed at how simple trading actually is. It can end up being the most lucrative job available with several benefits like easy scalability and extremely low set up cost. In this article, let us delve deeper into what you need to keep in mind to become a successful trader.
9) Don’t jump the gun
You need to remember this especially if you trade breakouts. Do not enter the trade as soon as the price moves above or below the trigger level. Wait for a couple of bars to close above the trigger level in the three-minute candlestick chart. Jumping the gun as soon as the price crosses the trigger level can backfire on you as most of the breakouts are false. Waiting for confirmation ensures that you do not get caught in a bull or bear trap.
Even if you use other indicator based strategies, wait for a confirmation from your trading system before placing that order. This will drastically reduce the errors you make.
As it can be difficult to sit and monitor your stocks for the day, you can set alerts by using Zebull. It is a high-end trading software which allows you to easily set alerts and take better trading decisions.
10) Don’t try to sell every market turn
It would be impossible to try and make profits about of every turn that the market takes. As much as it seems inviting, we strongly advise against overtrading. Ultimately, it would lead to more losses than profits. Therefore, spare yourself the daunting task of monitoring and speculating every market turn and close your workstation for the day once you have reached the profit or loss threshold of your trading system.
11) Never enter a position without first establishing a reward to risk
Getting into a trade without calculating its risk-reward ratio is a sure fire way to burn through your capital quickly. Establishing a strategy which definitely requires risk and reward to be calculated can go a long way in protecting your capital in the long run. It is alright if you do not make consistent profits. But losing your capital as a result of not calculating the risk and reward can cause a serious dent in your trading career.
12) Cut losses short. Let profits run
This is the fundamental math which will ensure that you are successful. DO NOT hold on to bad trades just because you spent a lot of time analysing it. However, it is recommended that you let your profits run in a trending market. This can be made possible by using trailing stop losses. This is a sure way to ensure that you make the most of a trending market.
By following these steps, you can slowly but surely get the most value for your trades. Therefore, spend just as much time on being psychologically prepared for a career in trading as you would spend on fine-tuning strategies and other systems. Happy trading!