How to become a good trader?

  • 221
  • 0
Before you can think about making money from your trading, you must first become a good trader, learn to trade well. Novice traders often make the mistake of wanting to earn as much as possible in as little time as possible.That is not trading. Trading is an investment activity, so the objective is to make your capital grow little by little.

Becoming a good trader is a long process, it takes time and a lot of work. So the first step is to accept it.If you are not ready to make efforts, do not start trading, this will prevent you from losing your money.

What is a good trader?



The idea that a trader is judged solely on his performance is widespread among novice traders.Double your capital, anyone can do it on a stroke of luck but one day, the wheel always ends up turning.It always saddens me when I see on a forum a so-called "trader" bragging about having done x% in the day or week.These people always end up not showing any sign of life afterwards, they have lost all their capital.

A good trader is above all a trader who links the notion of risk to performance. This risk is measured with the drawdown.This is the maximum historical loss recorded on the trading account over a given period.Between a strategy that makes 50% performance with a drawdown of 40% and another that makes 10% performance with a drawdown of 2%, I choose without hesitation the second.The risk/return ratio is much better.

With trading, your capital is your working tool. You must protect it.Before you think about possible gains on a trade, you must think about your risk.Losing trades are part of trading, you can't escape them.Some traders even win when they have more losing trades than winning trades.That's the importance of a good risk management.That is what is called money management.

A good trader is above all a trader who lasts on the financial markets. That's the first piece of advice I can give you.If you are new to trading, don't aim to win but to last as long as possible.Only long-term traders end up winning, others just ride the big dipper with their trading account and end up losing their capital.

How to trade well?



First of all, read the trader training pages on the various internet sites.This will not make you a good trader but it will let you acquire the basics of trading.For example, launching into Forex without knowing what pip or a lo is, is pure madness! You need to learn the basic mechanisms and language of the market in which you are dealing.

Then, it is essential to learn the basic elements of technical analysis. All these elements will eventually allow you to define your trading strategy.You must therefore learn about chart patterns, how to draw resistance and supports how to trade breaks in resistances and supports, inform yourself on the main technical indicators (Japanese candlesticks, Fibonacci retracements, technical indicators, etc.).This applies to all financial markets.

If you don't take the time to train yourself in technical analysis, you can't be a good trader.It'd be like trying to drive a car without a license.You may be able to move it forward, but you will make a lot of mistakes.Having a licence doesn't make you a good driver, but it's a good base.Afterwards, trading is like a car, if you your attention wavers or you take too many risks, you can have an accident (lose all or part of your capital).

I was talking earlier about the importance of measuring risk in trading.This is one of the key elements of trading. You must impose strict money management rules on yourself. According to a Forex study conducted on a wide range of traders, half of past trades are winners.Yet 9/10 of traders are losers.The reason is simple: non-existent or very poor risk management!

To trade well, you need to know everything there is to know about money management.You must control your risk on each position and on your entire portfolio.On one trade, you should never exceed 2% and that's a high maximum!If your trading account allows it (see money management for small Forex accounts), do not risk more than 0.5% per position.You must also set yourself a maximum loss threshold per day, even per week to avoid any psychological cracking.If you reach this threshold, you stop trading.

Becoming a good trader



Novice traders often look for a methodology that will lead them to winning trading practices.At the risk of disappointing you, there is no magic formula for becoming a good trader.There is a methodology for learning how to trade well, forlearning the basics of trading but it ends there.

It's up to you to find out how to become a good trader, how to find a winning trading strategy with controlled risk.There are thousands of winning strategies.This strategy will experience losing trades, loss phases but the important thing is that at the end of the month, your trading account is evolving positively.

Many people think that to win quickly, the right solution is to copy the strategy of a winning trader and replicate all their trades. This is a mistake.

On the one hand, by copying a trader's signals, you don't know how he manages his risk (when he takes his loss, shifts his stop loss, etc.).Loss management is often what differentiates a winning trader from a losing trader, not the trading strategy itself.Loss management is not something that can be learned in a lecture course, it is experience that will make you place your stop loss better and manage your risk better.

On the other hand, a trading strategy always goes through loss phases.The trader you copy knows that his strategy wins in the end, he has confidence in it, but you, you will doubt the trading strategy from the first losing trades and gradually you will deviate from it.

Really, copying a trader is not viable over time.He only has to stop publishing his signals and you have to start over.Copying a trader is not a solution.On the other hand, you can use it as inspiration to build your own trading strategy.If you find the elements he uses relevant, it gives you some food for thought. To become a good trader, the objective is not to find a winning trading strategy but to find the trading strategy that suits you, that matches your trading preferences, your investor profile, your vision of the financial markets.

About author

  • 5
  • 21
  • 40
  • 0

Add a comment

no pic

Comments

0 Comments