Here is a few tips to help you to become a better trader:
Cash is a positon too!
Most new traders think that a trader should be trading all the time, never miss a good opportunity! However, the reality couldn’t be more different. We are humans not algo traders. Day trader, momo trader or swing trader, quality is always more important than quantity. NEVER enter in a trade without a plan and certainly NEVER enter in a trade because of FOMO (Fear of Missing Out). Don’t ever forget that CASH is a strong position, too. It enables you to act when there is a good opportunity.
Consider Swing Trades
I personally like swing trades for number of reasons. I am a busy guy with number of Business interests. I don’t (and some cases can’t) spend my all day in front of a PC watching stocks. In swings, I generally look for good setups to enter in a trade, add, add more, hammer and exit. This tried and tested method generally works very well for me but wouldn’t work for most of the new traders (or traders with small account sizes) because of their account size and the maximum pain they can take in a swing positon. Perhaps starting small, testing the system and learning from it is the best for the new guys. I always have a plan while swinging. This plan includes where I enter, where I add, where I cover or if it goes against me where I exit the trade. Before entering into any trade, I always know what my maximum loss will be (NEVER change this during the trade!) and what I expect from the trade (i.e. how much I want to make from that trade – when reached, I am out). If it works against me and if it makes me nervous, I cut it out and move on to the next one. Sounds easy? Probably yes. However, in practice, this method needs immense discipline which you can’t develop overnight. It takes years for change to take place and constant practise to maintain it. Most new traders are looking for that magic formula to enable them being profitable overnight. Let me tell you: IT DOESN’T EXIST. If anyone telling you otherwise is after your wallet.
Set Trading Goals
I covered importance of setting goals previously in here. Setting goals for yourself will make you not only a better trader but also a more successful person in every part of your life. The goals you set should be achievable and measurable so it is crystal clear to you when they are achieved so you can move to bigger goals. If you are a new trader, your first goal should be not making profit but PROTECT your capital. If you can achieve this, then the sky is the limit…
Admit Mistakes and Learn From Your Mistakes
We are humans. We all have Ego. Admitting mistakes is not in our DNA. However, one thing you will notice from successful traders is they all admit their mistakes to themselves and to others. We all do mistakes daily. Important thing is learning from those mistakes and try not to do them again. It is a process and will take time. In trading, the same mistake can manifest itself in many different ways. The only way to learn is to experience it. You can ask, read or learn from others but the real learning only happens when you experience it in real life. The most important thing here is minimising the impact of your mistake. This in my opinion comes to admitting mistakes quickly, take action and always trade with correct trade size that you are comfortable with. You can read more about trade size here..
Constant Learning & Adapting & Having an EDGE
One of the most important things in life for me is constant learning. I am a student of life and I love learning new skills whenever and wherever I can. Similarly, I love getting more out of my trading and adding more ‘weapons’ to my trading arsenal by learning different types of trading, different types of trading vehicles and methodologies. Don’t forget, the market is constantly changing, there are number of different ‘cycles’ in the market. The best traders can see and analyse these cycles and make informed decisions about their positions and type of stocks in their portfolios. They scan stocks accordingly. They plan accordingly. One thing you need to do to become a better trader is ADAPTING. You need to adapt to the market conditions and change with the market. As a trader, you always need an EDGE. The change in market and your speed of adapting to that market is one way of having an EDGE. Information is another. Always KNOW what you are trading. Research the stock (or chart if more of a technical trader) and always know why you are trading it and what is your EDGE against other traders. If you can’t find the answer, move on to the next stock until you know you have an edge. And don’t foget any fool can enter in a trade, but only smart one knows when to exit a trade. Be smart.