Regardless of your trading style; day trading, swing trading, or position trading there is a simple step by step plan you can use to improve your odds for success, remember that trading is a game of probability, your job is to increase your chances of making a profit and lower your risk, today I am going to share with you tips that will help you become a profitable trader.
1. Start by paper trading until you can be consistently profitable on paper, Oanda and Webull offer demo accounts that will allow you to practice without having to risk a single dollar. I would also recommend doing a lot of practice trading with a real-time demo account but only with small quantities or very low leverage. This is the next best thing to real trading without risking a lot of money.
2. Regardless of how much money you have, start trading with a small amount of money and work up over time. You need to make all your mistakes with the smallest amount of money. Trust me, it will be a lot less painful! If you are new, do not risk more than 1% of your entire capital, this will allow you to learn and take some losses while you learn the business, even if you only have $500 dollars to invest, only risk 1% on each trade.
3. If you are a day trader, avoid the very small time frames like 1 or 2 minute as you get a lot of signals which can lead to over trading. These fast time frames are full of market noise and insignificant price activity. For me, the 15 minute time frame works best and I usually hold my position for an hour or two, leave the scalping to the pros for now until you get there.
4. Make sure that all your entry criteria are met for the trade setup. Don’t jump the gun until everything is in place and have multiple confirmations, do not get greedy and try a perfect entry or exit, if you are close to your target profit close your position and live to trade again.
5. If there are no clear signals in the market, then do nothing. Forcing trades almost always ends up with losses. The worse mistake you can make is to trade out of desperation and losing your focus, patience pays off.
6. Always place your protective stop loss immediately after entering the trade! However be careful of Stop Loss Hunters and Market Makers coming to stop you out, leave enough room for the market to move up and down while the trend is followed, I personally only use a mental stop loss but if you are getting started I would place one.
7. In your studies you will be exposed to many techniques. You will improve your results by concentrating on only one or two strategies. Get real good and consistently profitable with them first. The same applies to trading different Forex pairs or Stocks, focus on one or two assets and master their movements, also learn the fundamentals and read the news, this will help your confidence and you’ll become a master of one and not mediocre at many.
8. Don’t watch too many currencies at one time. This leads to too much confusion and indecision about which trade to take. I would stick to two or three of the major currency pairs, same goes in the Cryptocurrency world, there are hundreds or even thousands of tokens and projects, focus on a few and do not attempt too many strategies, learn one or two that work for you and you’ll become a profitable trader in no time.
9. Win, lose or draw don’t deviate from your strategies or change things, stay focused and do not change your rules, the markets change all the time but cycles and patterns do repeat, as long as you apply proper risk management you’ll be consistently profitable, even if you take some losses.
10. Patience, patience, patience – Many times I have been short and I’ve seen my trade go the wrong way, I’ve waited hours or days because my thesis and my due diligence confirm the price movement and eventually my trade will turn and make me money, this is key, I have dollar cost averaged as well and eventually hit my take profit, be patient and it will pay off, do not be afraid to wait until the market moves your way, the market is there to work for you, not the other way.
These 10 tips may seem very simple, but they are actually very hard to carry out as they require a lot of focus and discipline. Stick to them and you will trade better than the majority of day traders out there.
Always remember that day trading and investing is a business, treat it as such and take the time to master your craft, learn as much as you can from everybody and be open to what other traders and investors have to say, the biggest thing that I have learned is that the markets are there for you to make a profit and the opportunities are there every single day, it’s up to you to beat the market and make a profit, people make millions of dollars every day, you can do it too