5 things every trader needs to know
Trading is a buzz, especially when trying to figure out strategies. It is tough to stay concentrated with all those traders sharing their own strategies that apparently work wonders. Not being distracted by all the buzz is the key to becoming a profitable trader. Many newcomers think that the more they know, the better. It does not work that way. People sharing their strategies is a good thing, and I do not want to criticize that. Every trader needs some form of plan to get started. Many think it is about that “one” strategy that will make them buckets of money, and I am trying to point out why this way of thinking is not very productive. Even though the truth is quite near to that. There is no such thing as the “one “strategy because the strategy you decide to use is understood on a personal level. This means, the more familiar you are with the strategy you think suits you best is the one thing you should double down on.
Make sure to stick around till point 4 or 5. I will give you some great extra tips from my personal arsenal. At the end of this article, I provide my own routine that you guys can use or even copy. Without further hesitations, let’s learn! That brings me to my first point:
- Do not use more Indicators than necessary — As we discussed before, there is no such thing as the “holy” grail of trading. If you want to become good at trading, you got to understand the simplicity. Simplicity is king. The fewer indicators you use to judge your execution of trades, the better typically. Indicators usually just add to the buzz you should be avoiding while trading, so the fewer you use, the better your executions usually become. You need to change your mind here. Indicators should not help you enter a trade. They only should keep you out of a trade. This is one of the best ways to avoid being influenced by the indicators. Indicators should not be a critical point of your strategy but a healthy fundament to build your strategy right on top of the Indicators.
- Use a strategy — Do not just use any. Using the wrong strategy can really lose you money. Find a strategy that makes sense to you. Do not let yourself be talked in by trading mentors that guarantee you x amount of money with their strategy. The holy grail of trading doesn’t exist, but if you just want to spend a lot of time researching, double down here. Research every single strategy out there until you are confident that you want to use the chosen, focus on the selected strategy, and try to blind everything out that has nothing to do with your approach. Trading is about finding your focus and keeping that focus consistent like a death-ray.
- Use as many perspectives as you can before entering a trade — It does not matter whether you want to day or swing trade. The more perspectives and views you got on a particular trade set-up, the better your judgment usually gets. An often seen mistake is that Traders look at a timeframe that would make them enter a trade, and as soon as they move up higher in the timeframe, they redecide. The different timeframes can give you constructive insight while trading.
Now many of you probably knew about the first 3 points. So as promised to let me give you some tips that improved my trading in no time.
4. Plan your trade and trade your plan — By planning your trade, you really learn to understand what it means to trade. Because you must think about every move, you are going to talk before even taking it. This helped me immensely because I stopped taking emotional trades, and it gave me the new thinking of “Did I really think about this?” before hitting the buy button. Making unelaborated decisions while trading is one of the main reasons why many newcomers drop out very fast. So keep your head cool and trick your consciousness into a new state of thinking about trading.
- Document every trade — This is my favorite tip I can give you guys because it is easy to do. All you need to do is taking screenshots after you made a trade. Make sure to save the screenshot because we are coming back to look at it again at the end of the week. Reviewing your trades is a great way to learn and really is one of the best ways to preserve the experiences you collected while trading. All it takes is time and consistency. If you find the time to judge your successes and your failures, you will understand what it means to take a good trade.
Trading is by no means easy. But learning how to trade wrongly will not help you in the future. Ensure that when you choose a strategy, ensure that the strategy really suits your understanding of the markets. Do not be distracted by all these traders trying to teach you the new way of making your living. Find something that works for you and focus that death-ray on it. Make sure to have a strategy and a plan for every trade you are going to take. I would do it like this:
- Plan my trade
- Where is my entry?
- Where is my stop-loss?
- What is my target? (1:1, 2:2)
- Check the timeframe
- Check the indicators
- Entry as planned
- Get stopped out
3. After the trade
- Take a screenshot of your entry and your stop
- Save it and look at it at the end of the week again
By using this routine, you will bring consistency and simplicity into your trading. This model does not include a strategy, so you guys can use whatever strategy you feel most comfortable with. Use this routine every single time you execute your trades, and you will learn fast.
If you need help scanning the markets, you might be finding my daily podcast very helpful, or my blog where I post my thoughts on the charts and the markets. Make sure to check out my website for additional tips and tricks.