Top Trading Tips For Beginners In 2019
Trading Is NOT For An Income
Honestly, the amount of times we see adverts luring people to build a second easy income in Forex drives us insane. Yes, you may take profits out to support yourself. However, you are taking away capital from growing even further. We are not saying don’t take money out, we are saying change your mentality around trading to capital growth.
Actionable Tip: Focus on growth more than depending on a monthly paycheck from the Stock Market otherwise you could be going on a rich then broke then rich then broke rollercoaster.
Don’t Get Complacent
Feel like you just can’t go wrong? Made 10 out of 10 trades this month? Is the market a free ATM to withdraw as much cash as you want?
We’ve all experienced times when we feel unstoppable. Complacency reduces your attention to detail and could lead to a downfall or overconfidence in a trade. That could, in turn, allow you to open the floodgates to mistakes… This isn’t a losing trade, I’ll move my stop loss… I’m going to double down as I’m on a hot streak… just to name a few.
Actionable Tip: Stick to your plan… you are going to see this tip a lot!
Lockin Your Profits
Wait, what? Yes that is right, you can do this. Use a trailing stop loss or a mental stop loss that follows the profit’s direction. Locking in profit allows you to stick in the trade without the worry of realising a loss. This one little trick will make you more money over your trading career.
Actionable Tip: Take time to adjust the volatility of the asset and pre-determine profit lock-in areas. Simply move the stop loss in a profitable direction. Easy peasy.
Forget About the Secret Success Formula
Have you ever seen this line before?
“Do this one little trick and make $1,000 a day in the stock market”
Gurus and internet markets tell you that they have the secret sauce, the ultimate strategy and of course – the Holy Grail.
They target beginners in the hope of showing them a quick solution will bring floods of money and make them trade 100% accurate 100% of the time. Sorry, but this is absolute bullshit. Trading/Investing takes hard work to grasp and execute.
Actionable Tip: Get away and blank the adverts. They will not help you. Especially all them free courses with strategies.
Never Move Your Stop Loss
It’s an easy decision at times – you have the right idea, the right asset, the right market but the price is nearing your stop loss; what do you do? Move it further away?
Moving your stop loss is the single most costly mistake beginners do. You are better than that. If you get stopped out, it means your timing is incorrect. That head and shoulders pattern may be a triple top pattern you just overlooked… Either way, never move your stop loss. Never.
Actionable Tip: Easy, don’t move the stop loss.
You Must Be Disciplined
Investing/Trading is not an environment you want to lose your emotions in. Losses happen, mistakes happen, life events happen. Furthermore, it is just as important to refrain from your trading plan. The plan is there because you pre-defined what must occur before you can execute a trade. Don’t let yourself down and lose reckless money. Discipline cannot be taught, sorry.
Actionable Tip: Before you read any news, look at the charts, or even load up the computer – grab your trading plan and go through it a couple of times. So get the plan in your head. Spend 5-10 minutes getting the plan in check. Also, you may find it a good practice if anything comes into your head that is a distraction, write it down and ask yourself “Is this significant” “must I do this now”.
Never Ever Love or Hate A Stock
If you’re too in love with your trading vehicle, you give way to flawed decision-making. It’s your job to capitalize on inefficiency, making money while everyone else is leaning the wrong way.
Love and hate are two very costly emotions in trading. The market doesn’t care if you have the latest iPhone or Tesla car. You can love a product, but if you want to make serious money – you must be rational and sell when it’s time to sell.
Actionable Tip: At the end of the day, the company is a vehicle for you to make your hard-earned money work even harder than you did to make it. The only thing that matters for you is the PnL of the trade.
Your Intuition Is Key
Steve Jobs once said: “Have the courage to follow your heart and your intuition. They somehow already know what you truly want to become.”
Albert Einstein said: “The only real valuable thing is intuition.”
I’m sure you’d agree that these two individuals were successful, now listen to your “gut”.
Actionable Tip: Unlock and listen to your intuition further by using Youtube videos or googling. We cannot help much, sorry.
Early Signs Can Prevent Large Losses
Big losses are not out of the blue (unless it’s a Black Swan event), even still – market data is always the best way to gauge market changes, As long as you do your research, stick to your trading plan and NEVER MOVE YOUR STOPLOSS AWAY FROM THE MARKET you should be fine.
Actionable Tip: If it goes against your values and theories, change it.
You Must Not Break Your Rules
The only time you set a rule or a condition is after you’ve thought about it validated it and agreed with yourself that the rule should be implemented to protect you and your capital. If you break your own rules in bad faith, you are not only second guessing the market (gambling) but also sabotaging your self-confidence and conviction in your own abilities. You are better than that.
Actionable Tip: Clearly define your rules with purpose e.g)
Rule: I will not trade unless the candlestick has closed.
Purpose: Because the market may change direction during the same direction and make the execution signal invalid.
You Must Think For Yourself
This is a very important point. 90% of traders lose 90% of their investment capital in 90 days. Most of them look for a quick solution after they’ve taken a loss, or they are following others. Now, there are ways to obtain information from professional traders for free (read it here). When you have learned how to trade the markets, you will learn to think for yourself and manage your own conveyer belt of trading ideas.
Actionable Tip: Stay away from gurus, news channels showing trading tips, trading tip websites etc.
Leave Your Personal Life Outside
We don’t mean to sound insincere but the fact of the matter is if you are unable to consciously and clearly make decisions with certainty, then you will have a higher chance of underperforming. This too can have a knock-on effect on your personal life… losing money is never easy, especially when other things are on your mind.
Actionable Tip: Ask yourself “how significant the issue is” and rank it between a 1-10 scale; if it is a 5 or greater – deal with it immediately (if action is required) or if something tragic has happened – take some time off to deal with it. Trading in the wrong mindset will lose you more money and continue to deepen your negative thoughts. If it’s not a huge issue and can be dealt with after you’ve done your trading then just be extra cautious when investing.
Don’t Chase Your Losses / Revenge Trade
Losing money happens. It happens a lot. In fact, you may lose your trades 90% of the time, but that 10% that are profitable can vastly outweigh the losses with appropriate risk management. Chasing losses expose you to potentially losing even more as your mindset drifts from looking for positive opportunities to recovering the losses opportunities.
Actionable Tip: This is a big one that serious professionals and hedge fund managers* use. Implement Kelly’s Criterion to help not only manage your risk and capital deployment but also your performance. Every loss generates a new capital deployment size helping you automatically reduce the risk to your portfolio when you are underperforming.
Fun fact: This is used to help deploy capital between the Hedge Fund’s traders. Traders that perform well are rewarded with more capital from the Hedge Fund manager. Whilst underperformers position sizes are reduced according to Kelly’s Criterion.
Analyse Your Trades
Any profession will go through reviews of their performances and discovering ways to improve themselves. This is important as it can be an empowering exercise to do and stimulate confidence.
Actionable Tip: Write a trading journal and note down your mistakes and winners. This builds a log of what you did right and what you did wrong which can unlock patterns. Patterns can be repeated and broken.
Understand You Are In The Business Of Risk
If the above title comes at a surprise to you, you best get back into the education arena. You do not buy shares for the sake of it. Your goal is to have the smallest risk and ascertain the highest reward. You should be constantly evaluating your risk. Risk is the only true factor that remains the same when we trade and therefore is the what we should focus on.
This is easy to point out, have fun and enjoy. You should feel empowered and joyful that you have taken action in learning to grow your money. If you don’t enjoy it, trading can be extremely tedious…