1. Trading is not a get rich quick scheme. it is a normal investment that gets you return on capital.
Did you ever hear of a trader making 100% percent return per month on a consistent manner? If you did, did you see a proof of that?
Trading professionally with proper money management would likely get you a return of few percents a month, from my personal experience a 3-5% return on capital per month is a very realistic number.
So if you’re that kind of person who wants to “make a killing” trading please reconsider your expectations
2. You should be well-capitalized. Small accounts will probably burn you.
This point is correlated to the first one, let me illustrate by an example:
Suppose that you have a 30k trading account, according to the 3-5 percent return per month rule; that would give you 1000-$1500 return per month, which is relatively a very good number.
Now let’s assume that you have a 5k account, according to the 3-5 percent rule, that would return 150-$250 per month.
In the 5k example, the return would likely be unsatisfying for someone looking to trade for living. Would it be for you? Wouldn't you break your money management rules and take more risk to increase that return?
3. Technical Analysis doesn't work all the time. Assumption we make will always have a percentage of failure. The main goal is to keep you risk limited, your targets bigger than your risk for consistent profit on the long run.
4. Trading is not about forecasting the market. Do not try to be smart and always forecast where markets are headed. What a trader does is, wait for the market to GIVE him certain conditions that validate a trade. (Don’t trade under the market rules, trade under your rules). Do you feel sometimes that your lost and don’t know what to do ? its probably because of this. This is very important, and helps avoid getting lost in the process..
5. If you did use stop loss on your trades within the past year, but you didn't and took excessive risk only on one trade, this single trade might wipe out all of the profits you gained through the year.
How many times did you ignore your stop loss convincing your self that you will close at better price, it may have worked sometimes, but what if the price goes against you more and more, are you mentally strong enough and able to close at a bigger loss? you probably won’t, and end up with a margin call.
6. Don’t over analyze. Over analysis and complicating your tools will lead to confusion and not necessarily efficient.
7. Ignore your bias, trades require technical evidence, 3,4 or 5 conditions that occur concurrently.
8. Always use a top to down analysis approach, from the higher time frame to the lower time frame. The higher the time frame the more strong and invulnerable the trend is, and the more strong and invulnerable the support and resistance levels are.
9. Trading setups that occur within the context of the trend usually turn more profitable than those against the trend.
10. Don’t give up when you encounter a losing streak, yeah it can go up to 10 losing trades… don’t worry it’s normal in trading.
Hope you found it useful and enjoyable... If you have points that you would add to this, I would be happy to hear them, please comment and discuss..
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