What I Wish I Knew When I First Started Trading – Part 2

If you have not read the first part of the article, I suggest you do so here.

Here are a few more things that I wish I knew when I first started out.

Simplify… but not so much that your strategy does not work

I’m sure you have heard it’s best to keep things simple when you trade. There’s a lot of wisdom in that saying, but it’s not as simple (pun intended!) as it seems on the surface.

A successful trading plan may well be summarisable on a napkin but there are some skills you need to acquire as a trader that might be difficult for a beginner. Namely:

Often it is only precise execution of these more complex skills that turns your losing trading plan into a winning one, and if you neglect to learn these skills because you are a beginner it is highly likely you will fail.

So instead of hiding behind the mantle of simplicity, realise that your role as a new trader is to acquire the skills you need to be successful.

I can guarantee that if you take the time to become an expert in position sizing and using multiple exits, then it will do wonders for your future as a trader.

You should never lose money

Your first job as a trader is not to learn some fancy entry technique. Rather, it is to learn to protect your funds.

I’m talking about your core capital here – the funds you start out with.

Just because your trading plan says to risk 1% of your account per trade does not mean you should do this with your starting capital.

Cut your trade size dramatically until you are in profit by a few percent.

Starting out with $10,000? Then only risk $10 or $20 maximum on a trade. Wait until you are up by $100, and then increase your position size to $30 per trade and so on. Only start trading at your full size when you are up 3%.

Yes, it may mean you have a slow start to your career. But more likely it will mean you keep any losses to your money tightly constrained, which will boost your confidence and keep you in the game while you learn.

Failing to protect core capital kills more trading careers than anything else – not just for the financial loss, but also because of the very real psychological scars. Please take care.

Get very, very, clear on what you are trying to achieve

50% of the system development process should be thinking about your objectives and what you want to achieve by trading.

Too often people open an account and place trades on a whim, not understanding:

  1. What they want from that trade
  2. What their trading plan is trying to achieve

And saying “you want to make profit” is not good enough.

Your objectives form your roadmap, and everything else flows around them.

What should your objectives be? Only you know. Take some time out to think about what it is you are trying to do, and how you would like to trade.

You want to consider your lifestyle, commitments, and what resonates about trading to you. Say you always thought of yourself as a day trader, or perhaps you have read about a trading style that you might like to try.

These objectives will evolve while you grow as a trader, so don’t feel as if you have to set them in stone. What matters most is that you have a strong foundation of objectives as your starting point.

(There are lessons on this in the Advanced Forex Course for Smart Traders)

Know your market types

Regular readers are probably sick of me banging on about it, but for those of you that are new to trading, one of the things that helped me most was determining the market type and then applying the correct strategy to that market type.

This, perhaps more than anything, changed the way I trade. I wish I had known how and why to do this from day one.

I have wasted countless hours searching for the Holy Grail trading strategy – a system that performs excellently in multiple, if not all market types. It doesn’t exist.

Instead, I build and fine-tune separate systems for separate market types, and it has transformed the way I trade.

Please take the time to read this lesson on market types if it’s on the only thing you do.

How to Trade What’s In-front of You With Market Types: a Technical Lesson

It will hopefully change the way you trade from the get go.

Love the journey

Trading is a wonderful journey of self-discovery.

The beauty of the markets is that to become successful, not only will you grow as a trader, but you will flourish as a person.

I am blessed to be able to live and work full-time in the markets, and it is my hope that the journey will be as transformational for you as it has been for me in all aspects of my life.

I wish you the very best, and if you have anything on your mind please feel free to share it.

Cheers,

Sam

About the Author

Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is a co-owner of Forex Signal Provider FX Renew (Get a FREE 30-day trial). If you like Sam’s writing you can subscribe to his newsletter.

 

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