Be successful in financial trading with this simple guide.
Most small traders (i.e. the home-based independent speculators) end up losing money when they trade the financial markets. Statistics say that 95% of these traders lose over time – which is why the investment professionals refer to them as the “dumb money”.
We’ve all been there at some time in our trading careers. Some initial successes which hook you and then a run of losing trade after trade and not knowing why, or what you need to do to break the cycle…it doesn’t take long until your funds have expired and you feel stupid!
Imagine what life is like when you consistently end up on the winning side! We’ve been there for a good few years now and it’s not by chance.
To help ensure your chances of success, make sure these tips recommendations are part of your trading strategy.
Keep losses small and maximise winners - This sound obvious, of course, but it’s often traders doing exactly the opposite of this that accelerates them along the path to financial ruin. If it’s clear that the trade is going against you, get out quickly. In many cases a trade will go the wrong way at some point – it’s not always possible to pick the perfect entry point and so you need to allow room for the trade to breath as it confirms a bottom/ top or performs a natural retrace after a big move. But if it’s clear that market conditions have changed it’s best to cut your losses and move on to the next trade. Never widen your stop-loss position in the hope that things will turn around. Conversely, when the trade is running the right way don’t panic and take your profits at the first sign of it stalling. Sometimes this makes sense when the market is clearly turning or if your initial pre-trade assessment wasn’t accurate and so you are lucky not to have lost; but generally it’s wise to keep the trade open and just keep trailing your stop-loss position in behind the trade to stay in the game as long as possible. If you look at our trading history, you’ll notice that (as of 27th Jan 2013) our average winning trade is $37 (or 370 points) and our average losing trade is $19 (or 190 points) – this, coupled with having more winners than losers, is why we are successful gold traders.
Don't overtrade - Whilst trading could, and should, be enjoyable you need to be careful that you’re not getting caught up in the excitement of “the gamble”. All too often we see people placing numerous trades each day on multiple markets – placing too many trades that haven’t been planned just for the buzz of being in the game. We usually make just 2-4 carefully planned trades a month (and some months we sit it out completely if there isn’t an obvious set-up) as overtrading means more money is lost on commissions and spreads and the likelihood of losing is higher as trades are more frequent.