Investors can only profit from their investment when the market moves up whereas traders don’t have to depend on bull markets for earning returns and can also make a profit in down trends. This is a crucial benefit that traders can get over investors i.e. the ability of earning a profit regardless of whether the market is moving up or down. However, this doesn’t mean that trading is easy. In fact, you should know that trading requires rigorous discipline and a skill-set. A number of people decide to opt for trading because they believe that it is the easiest way of making money.
The key is to remember that you have to have a disciplined approach if you want to make the most out of your trading. Here are some rules that can help you do exactly that:
Come up with a trading plan
Successful traders are known to maintain charts diligently and they also set aside some hours for market analysis. You need to update your book and come up with a new strategy on a daily basis. It is essential for you to identify the main trend in the market. You should be able to judge the strongest sectors of the market so you can invest in them.
Do not overtrade
One of the single biggest mistakes made by most traders is overtrading. A disciplined trader knows that when the market is choppy, it is a good idea to trade light and not trade forcibly if there don’t seem to be any trades on the horizon. If the market is trending, you can trade full steam, but you should cut back the stakes if you are not confident of your expected move. In order to become a disciplined trader, you need to learn when to trade light, when to step on the gas and when to pull back altogether.
Don’t let the losses get to you
Yes, as the trading market is unpredictable, you need to be cautious. Money management techniques need to be applied to every single trade, which means you should not over leverage. The rules you outline for yourself should be religiously followed. If you suffer from any losses, you should learn to take them in stride and try to understand what went wrong. Losses can actually give you important trading lessons so they should not be ignored.
Try to wait for the large market movements
One of the issues that novice traders face is that they tend to book profits very quickly because they like the feeling of winning. But, when it comes to booking losses, they don’t move as quickly and this causes them to lose their account equity. Bear in mind that when you just book small profits, you are just helping your broker grow rich. If your growth is not sustainable, your trading account will not grow. Therefore, if you enter into a large move, you need to ride it out and not book a small profit right away.
Continue with your learning
It is vital to remember that trading is not something you can learn in a day, a couple of weeks or even a few months. As a matter of fact, it is an ongoing process and even successful and experienced traders have to continue reading any new research or element introduced. This is one of the top reasons why brokers such as GigaFX have a resource and education center where their clients can find e-books, training videos and webinars on trading strategies and techniques, trading psychology and various other tips.
Consider trading a business
Trading can be a very expensive venture, especially if you are new. You need to think of it as a business and make it profit-oriented. A good trader is one who will assess their performance at regular intervals and try to identify the causes of inferior as well as superior performance. Instead of making erratic large profit and losses, you should focus more on consistent ones. Furthermore, trading performance should not be judged on an individual, but should be deemed a consequence of wrong or right actions. If you want to be a disciplined trader, you need to identify if you need to stay away from the market altogether or reduce your position size.
The problem with unsuccessful traders is that they are willing to cut down their expenses, but don’t see where they are going wrong. Denial can be very costly in the trading world. If a particular trade is not going the way you expected, you should eliminate or reduce your positions and see what happens.
Never put blame on the market
Another rule you need to remember is that if there is a reversal in your fortunes, you should never blame the government, the market, the companies or anyone else for your losses. There are ample opportunities in the market that you can use for making money. If you don’t recognize them, then it is your fault alone. Furthermore, you also need to know that there are different phases of the market. Sometimes, it is trending and other times it is choppy. It is up to you to take full advantage of favorable trading conditions and stay away from unfavorable ones.
Keep a cushion
If new traders enter the market when it is roaring, they believe that it is the best place for investing their money. However, seasoned and successful traders know that if the market changes and begins to act differently, profits may stop coming in and there may be significant losses. Thus, you shouldn’t invest more than a certain amount at any time. Withdraw your profits from your trading account and maintain them in a separate account. Work with reliable brokers such as GigaFX to avoid inconvenience at the time of withdrawal. Read a GigaFX review here. Accumulating profits during good conditions can help you when the market turns unfavorable. You will have a cushion, which will prevent you from making rash decisions.
Follow these rules and you will go from being a new, inexperienced trader into a disciplined one in no time at all.