Trading Tips Part 1

#1. PROTECT & PRESERVE YOUR CAPITAL!

Inexperienced traders enter the markets focused on how much money they stand to make. Professional traders do the exact opposite; they focus on how much money they stand to lose and how they will ensure that any loss is kept to an absolute minimum. Follow the lead from the professionals: protect and preserve your capital.

#2. ALWAYS SET A STOP LOSS. ALWAYS!

One way to help achieve rule No.1 is to set a stop loss. If practicable, do this before opening a new position. Never rely on a mental stop loss. This is the sole preserve of a rare breed of trader: one who is very experienced and consistently profitable. The stop loss lies at the heart of all risk management strategies and is absolutely vital to ensure that you ‘cut your losses short’. So, no arguments: always set a stop loss.

#3. CUT THE LOSSES SHORT – LET THE PROFITS RUN!

Cutting the losses short is achieved by always having a stop loss! Additionally, continually ask yourself this question: ‘had I not entered this trade when I did, would I want to be in it now’? If the answer is no, then exit immediately. You do not have to wait for your stop to be triggered before exiting a trade! Letting the profits run is down to money management and an excellent exit strategy. Fine-tune these elements of your plan to cut the losses short and let the profits run.

#4. TRADE WHAT YOU SEE – NOT WHAT YOU THINK!

Egos and trading do not mix. The little voice inside your head that tells you what the market is going to do next needs to be gagged whilst trading. Whilst you are listening to him / her, you are not paying attention to what the market is revealing to you. Focus on your charts, your indicators if you use them and the price action. Look at this information and trade what you see, not what you think.

#5. NEVER CHASE YOUR LOSSES. EVER!

     After a losing trade it is imperative that the emotions are kept at bay. This can be hard to do, especially if it      is   a silly error that led to the loss. When you re-enter the market, you will be trading for revenge. If you         chase your losses, determined to recover them, the consequences are likely to be disastrous. Almost inevitably, this results in more losses,