Being successful as a trader is not easy. To start with, you need sufficient capital to start off and a high appetite for risks. However, it is possible to make money if you stick to a proper trading plan and remain disciplined. You should not expect to become a millionaire overnight. Trading has its challenges and knowing the fundamental rules of trading can give you an edge over the others.
- Use a trade plan: To dive into the trading waters without a plan in place is dangerous. You need to set achievable targets, rules, and limits, which will help you to decide when to enter and exit trades, and keep your losses to a minimum. Once you have a plan, test it first through demo accounts before risking real cash.
- Make trading a business: You can aspire to be successful as a trader only you decide to devote much time to it. This means taking it up as a part-time or full-time business and not simply as a pastime. This is because when it is just a hobby, you are not motivated to learn. When this is your only source of income, you automatically strive to learn.
- Use latest technologies: With more and more sophisticated tools and technologies coming up, it is wise to take advantage of these when trading. Trading is marked by cutthroat competition and unless you can adapt to changes you will lag behind. Besides backtesting a plan using historical data you can access charts to analyze market trends
- Protect your money: You are going to need capital to start trading, and saving money for an account takes time. You must also remember that traders will invariably experience losses from time to time. This means that you should not take unnecessary risks; this will only jeopardize your capital.
- Do not invest more than you can afford to lose: This is a thumb rule for traders and means that you should never put in more money than what you can afford to let go of. The money you invest should be disposable income, not what you need to sustain your living costs.
- Keep learning: There is no end to learning when you are into a profession like trading. To make good trades you need to study the market continuously and keep abreast of the latest trends. Traders need to master the art of observation and focus to hone their trading skills and interpret the nuances of the market.
- Use a method that depends on facts: Traders must take time out to develop a methodology which works. Trading scams are rampant and one needs to be wary of these. Besides, trading decisions can never be based on emotions and impulses. If you are desperate to start trading but not willing to research it, you will land in trouble.
- Use stop loss: This is based on pre-determined risks which a trader is ready to accept for every trade. It helps to minimize a trader’s losses and can relieve him of unnecessary worries.
- Know when to quit: You should immediately stop trading if you are an ineffective trader or your trade plan is lacking. The latter is responsible for insurmountable losses than what you could have anticipated. You need to tweak the plan first before trading any further.
- Look at the big picture:
You need to understand that losses are going to be part of your journey. It is the cumulative gains which will make a difference.