Right then, the top 10 trading tips!
At Trade Room Plus, each of us has come through a trading knowledge journey. We’ve come from knowing nothing, through failure and loss and on to consistent profitability and running a live trade room. Our personal trading journeys have informed our teaching and mentoring of thousands of traders. In this article we list our top 10 trading tips to help you succeed like us.
Be prepared, some are blunt and may challenge your existing beliefs about trading. This is because but we have to be direct and honest when it comes to trading. There’s no room for messing about when it’s your hard earned money on the line and how risky trading can be when done incorrectly.
One: Be realistic
You’re not going to turn a $10 account into a million dollars in 3 months whilst trading from a mobile phone on a beach after having driven there in your new Lamborghini.
If you think this is possible then feel free to go on Instagram and follow one of the hundreds of Forex scammers who will sell you this impossible dream. You’ll find them easily by seeing them pose next to a hired supercar outside a rented Airbnb accommodation whilst wearing a fake Rolex Submariner and placing lots of ‘prop cash’ next to a laptop displaying MT4.
If you’re lazy and are looking for ‘easy Forex’ or magic signals that will do all the hard work for you, then you’re going to lose all the money you put into a trading account.
Trading is very hard. That’s why most people fail. Most people aren’t willing to put the time and effort into their own trading development in order to succeed.
These trading tips are designed to your expectations are inline with reality.
It will take time and effort to succeed in trading. If you don’t think that’s the case then don’t bother because you’ll end up another trading loser.
Two: Take losses or fail
“Most traders lose money trading to avoid losses”
If you cannot take a loss in trading, you will fail.
Now some of you reading this will still be fighting this fact. You will still, deep down (and because you want to), believe that you can find a system that means you don’t have to take losses.
You won’t, so give up trying.
Adding to losing positions / averaging in / scaling-in will save you on some occasions. The time it doesn’t is the time you receive that margin call from your broker and you lose your trading account.
If you owned a shop and had to buy stock, would you try and avoid doing so? No, because in order to make a profit in that line of business you need to spend money on stock.
Trading is no different, you have to ‘spend’ money to make a profit.
Taking losses is the cost of doing business in trading just as spending money on stock is the cost of business for the shopkeeper.
We are not designed to take losses. Something called ‘loss aversion’ makes losses more psychologically intense relative to gains. This is a hard-wired psychological bias that you’ll need to battle against and chip away at.
However, once you get to the stage of accepting and embracing losses (they’ll never feel good, so don’t ever think there won’t be emotion with them), it transforms your trading.
No longer do you wake-up (after losing sleep all night worrying) to a ‘sea of red’ P&L on your trading platform. No longer do losses render you unable to see other trading opportunities.
These trading tips are designed so you understand what you must do to succeed.
Stop thinking about how to avoid losses and start thinking about how you can take great losses.
Accepting losses will make you profitable.
Three: Sometimes doing nothing is doing essential
That sounds strange, doesn’t it?
In most jobs and walks of life, doing more is better.
Imagine you owned a car garage and were a mechanic. The more cars that are brought in to be repaired / serviced the better. More cars = more work = more revenue.
The same can be applied to most jobs and walks of life and therefore we come to associate activity with progress and achievement.
As with a fair few things, trading is different. More is often less and less is often more. We’re interested in a few high quality decisions rather than lots of low quality decisions (which are often accompanied by ‘over-trading’.
Let’s say you take 5 trades per week. How many quality decisions do you actually have to make? You have to decide when you will get in an out of the trades. That’s it. The beautiful simplicity of trading. You have to specify an entry, stop and limit. And when in a trade you may wish to consider (if you actively trade) moving your stop loss to reduce risk / lock-in profit.
So that’s a handful of decisions over 120 hours per week.
Even if you’re trading more frequently and day trading, it’s still very few decisions relative to the time the market is open.
Leaving your trades alone can be one of the most important things you can do. How many times have you messed around ‘managing’ a trade only to end up with a poor result whereas if you had left it alone.
These trading tips are to stop you ‘getting in your own way’.
Leave your trades alone. Stick to your plan. Let them play out.
Less is more. Doing nothing when appropriate makes profit.
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Four: Trading psychology is essential
Trading educators love to focus on strategies and technical indicators. Why? Because that’s what everyone is searching for!
If search queries and volumes actually reflected importance, then for every 1 search about strategies and technical analysis, there should be 9 searches for trading psychology.
That’s how important it is.
The problem is it’s also hard work. We simply aren’t mentally built to trade. There are many reasons for this and we can’t even scratch the surface in this article.
All your trading errors are due to poor trading psychology. Your fear, greed. The reason you revenge trade, over-leverage, over-trade, under-trade, move your stop loss, snatch-profit and many more.
No strategy, no indicator will help you here.
We are contacted all the time by people who are looking for a magic indicator combination they are searching for to make all their trading problems go away. It doesn’t exist.
You’re going to need to work on your trading psychology and start off by understanding why feel and act the way you do when it comes to trading. Only when you know the cause of the effect can you begin to address it.
After you have read this, have a look at our DAX trading strategies and how we apply rock solid trading discipline to our trades.
The area of trading psychology you’ll need to look at is called ‘behavioural economics’. The best book to begin with this subject matter is, ‘Thinking, Fast and Slow’ by Daniel Kahneman.
It’s heavy going but if you’re serious about learning trading psychology then this one of the books you should be reading.
These trading tips are designed so you think a little deeper and wider about your personal development.
Five: Don’t set daily targets
Out of all the questions I hate, this one is fighting for the top spot:
“How many pips / point do you make per day?”
I probably shouldn’t as it’s an understandable question for someone developing with their trading, but it demonstrates such a lack of understanding of trading / statistical basics.
No professional trader sets themselves daily targets. Look at trading institutions like investment banks and hedge funds. They are interested in quarterly performance. The minimum period you want to be looking at is a month.
Here are three compelling reasons why you shouldn’t have daily targets:
The first is that you’ll force trades on poor trading days. Say, for example, you want to make 30 pips per day. What happens if your first two trades are losers and you’re minus 20 pips for the day? Do you keep trading until you hit your 30 pips? What happens if you lose another trades (3 losing trades in a row happens)? A recipe for disaster by turning a losing day into a massive losing day.
The second is you’ll stop on good trading days. Let’s say you take a trade in the morning and make 30 pips. Do you stop for the day? What about if the trading day is superb and you could have taken another three winning trades and made a lot more profit?
These trading tips are designed to give you perspective.
The third is daily targets show a lack of understanding of basic statistical principles. In order for a trading strategy to play out (the expectancy) you need to trade enough times (the sample size) so the probabilities will play out. Basically, if your strategy should win 65% (the expected value) of your trades, that 65% is much more likely to occur when you take a greater number of trades. If you only take 10 trades there’s a good chance you’ll move away from your 65% whereas if you take 100 it’s more likely you’ll be closer.
Six: Don’t use too much leverage
Trading is always such a tease. You can instantly visualise the profit. Say you make 50 points of profit on a trade at £1 per point. You’ve made £50. It takes no thought at all to think, “Well what if that was £10 per point? I’d have made £500!”
And there begins the road to over-leveraging.
The road that leads to risking 5, 10 and 20% of your account in one trade. And what happens then? Bye, bye to your account!
Here’s how much you need to make back-up once you drawdown:
Lose 50% of your account? Good luck making 100% back to get you back to where you started.
There’s a reason professional traders use 1-2% (perhaps even 3%) of their account per trade. It’s because they don’t want to have to get themselves out of a big hole and they know the psychological impact of big hits to their account will impact upon their trading.
A common approach we’ve also seen is where traders with a small trading account think to themselves, “Once I get a bigger trading account I’ll risk less.”
Of course, the trading account never gets big in order to do that because it gets blown through over-leveraging.
These trading tips are designed to keep you in the game. No capital = not trading. Sometimes called ‘rule number 1: Capital preservation’.
Don’t over-leverage, don’t get greedy. There’s no rush.
Seven: Record your trades
Whenever I am mentoring someone I’ll often start by asking them about their trading:
“Which strategy is your most profitable?”
“Which instrument is your least profitable?”
These questions usually highlight one thing, that the trader in question isn’t recording their trades or using a trade log.
This is crazy. This is one of the most important things a trader can do to improve and develop. How can you possibly say you’re taking your trading seriously if you don’t even carry out basic analysis of your trading history?
There are a few reasons traders don’t keep trade logs including obvious ones like they are lazy. There is a more serious one. That being that it helps a trader avoid accountability for their actions. If you keep a trade log then it means you have to face-up to your own trading flaws. It becomes harder to ‘blame the broker’ or ‘blame the technical indicators’ you are using.
These trading tips are designed to give you a structure for your development.
We use Edgewonk because it’s a superb trade log and provides the most comprehensive analysis and feedback available. You can purchase your own copy of Edgewonk here.
At the very least start to just mark-up your charts and take screenshots. Put them in a folder and review them. Look at this example of an actual trade we have taken:
Now imagine if you have a collection of these and how powerful that could be for your trading development if you were to review them periodically.
Stop being lazy, record and log your trades. Losers are lazy, winners are professional.
Eight: Focus on the 'controlables'
In most successes in life, we achieve it through controlling the external environment. Let me give you an example so you know what I mean by this.
Imagine you are the CEO of a company. You have a large amount of control over external matters. You can control what products / services you sell or provide. The prices you charge, who supplies you, where you are located, the company’s policies and procedures etc etc.
We associate success with being able to do this.
The major issue we have with trading is we have no control over the external environment (other than deciding when we get in and out of a market). We have to accept that the market will do whatever it will do and we have no control over that.
It sounds obvious, but when you think of some of the common trading errors people make, then they show that people haven’t truly accepted this.
Think about ‘revenge trading’. If you revenge trade you are trying to get revenge on the market. You are trying to show it ‘who is boss’ and you are trying to exert your control and dominance upon it.
The market doesn’t care. You have no influence and all revenge trading will do it cause you pain and hammer your trading capital.
These trading tips are designed to make sure you’re not wasting your energy on things that won’t benefit you.
The only thing you can control is when you get in and out of the market. That’s it. That’s where your energy needs to be focused upon. Perfecting your trading executions with rock-solid discipline and psychology on top of fantastic trading strategies.
Nine: Trade fewer instruments
“Jack of all trades and master of none”
There are thousands of instruments to trade. It’s easy to get excited by all the possibilities, especially if you have itchy fingers and are prone to over-trading.
My advice is to start off with a few instruments and get to know them. Avoid jumping from one to another just to look for a trade. Each market has its own trading personality you need to get to know in order to trade it competently.
There are people who make a living trading from trading only one or two markets. I have worked with a few people who now make a living exclusively from trading the DAX.
Once you’ve become competent and profitable at one instrument, then move onto another. There’s no harm in monitoring a new instrument and not trading it until you start to learn its personality and nuances.
These trading tips are designed to make sure you remain focused.
Our trading team consists of three of us. We generally trade the FTSE, DAX, DJIA, SPX, GBP/USD, EUR/USD, USD/CHF, USD/JPY, gold and oil.
Certainly not an excessive amount for three people, but combined, we know these markets very well.
Ten: Find a legitimate educator
You wouldn’t learn to drive without an instructor, so why learn to trade on your own? To continue the analogy, most ‘trading educators’ unfortunately would teach you to crash the car so you need to be critical in who you choose.
It’s extremely easy to package up some generic trading education to make it look pretty and sell it for a nice price. Hell, price it high so it’s ‘reassuringly expensive’.
It’s also easy to show fake ‘trading bling’ as I described in number 1 to reinforce this.
It’s all garbage and should be ignored. Even if a trader has made money trading and has actually bought nice things, how does that help you?
It doesn’t. Here’s what I think you need to be looking at with trading education and it is very simple. Ask yourself the following:
“Is the educator willing to trade live in front of me?”
That one single question will tell you all you need to know. If they won’t trade in front of you, why not? You know the answer. We know proper trading help and trading support can dramatically cut the learning time needed to become a successful trader. A big reason for this is because a lot of the noise and rubbish is cut out of the aspiring trader’s development.
If they’re claiming to be making a living from trading and they are trading, then why can’t they do it live in front of you? These trading tips are designed to stop you getting sucked in by scammers.
We have always thought it essential to trade live in front of people we’re teaching and mentoring. Is there a better way for aspiring traders to learn? We don’t think so. If you want to find out more about our live trade room you can can click here to read all about.
There is lots to think about when trading. Our top 10 trading tips for success are all serious things you need to be thinking about if you are wanting to accomplish your trading goals.
The market is serious business so trading is serious business.
Perhaps it’s time you started getting serious about it.