By Admiral Markets
Dear Traders,
Most traders believe that they treat trading as a business, not a hobby.
But how do you know if you are ready to do trading business?
Today’s post presents nine fundamental building blocks of any serious approach to trading.
Only the most critical elements like choosing the
best software are included.
Free Reports:
Maybe your approach lacks solid business acumen or perhaps it’s already fit-for-purpose.
Only one way to find out, right?
Your motivation is the motor behind the persistence needed to succeed in trading…
…and many other things in life.
The first step is to carefully think about why you want to trade the Forex and CFD markets.
Begin by writing down your intrinsic (e.g. freedom) and extrinsic (e.g. a purchase) motivation on paper.
You can also print it out, if you like.
Now:
You will be able to draw on the above motivation during the consistent up/down movement of modern trading.
A little bit of stimulation goes a long way.
But above all, be persistent – especially when dealing with tougher times.
Persistence will also be in high demand when you start working on your goals.
Goals can be seen as measurable units that break down motivation into actionable parts.
Whereas the motivation is a grand vision of the future…
…goals are more concrete steps that ultimately lead to your vision becoming a reality.
And while creating those goals, follow the well-known
SMART formula, i.e:
For example, the goal “I want to buy a new house” is measurable but not time-bound or specific.
So how do you make it SMART?
Conversely, a SMART goal would be to purchase a house with a:
You need to choose software that supports your specific trading style in the best way possible.
The software choice is critical because it simplifies or automates trading decisions and actions.
For instance, the
MetaTrader 4 Supreme Edition plugin from Admiral Markets offers more than 100 features and multiple advantages over other current market options:
Last but not least, good software offers the proven benefit of easy trading access, which is why Admiral Markets offers:
The
trading plan is at the heart of your trading decisions.
It specifies how you will:
Basically, the trading plan details your approach to your Forex trading business.
For instance, I use the following concepts in my trading plan:
Your trading plan enables consistency over time because otherwise your trading could vary every day based on your emotions.
My advice is to build experience with a relatively simple approach but
improve when possible and avoid looking for the perfect system.
Within each trade, you have an option to:
Actively managing a setup allows for a greater degree of control and precision, because you can change your exit depending on how price action develops, but:
Passive trade management is also known as “set and forget” and offers the reverse pros and cons of active management (less precise but also less intensive).
My best advice on trade management is this:
Risk management offers traders the chance to largely preserve their trading capital even when they encounter a drawdown (a losing streak).
A risk management plan, therefore, specifies how much risk is taken per trade and what the risk limits are per day, week and month.
As a trader, it is important to:
Of course, protecting the trading capital is key to a Forex trading business, but protecting the mental capital is equally so.
And that leads us to the next topic.
Trading psychology affects a trader’s ability to implement the setup according to their trading plan.
Fear, impatience, hope and greed all contribute to rising emotions, which leads to flawed perception and trading biases, like the
sunk cost fallacy.
An effective method is to customise the trading strategy…
…and base it on your own risk tolerance and trading psychology (preferences).
Furthermore, a trading psychology plan should provide various details, such as:
Point 4 explains why completing evaluations and collecting feedback is vital (see point 9).
As mentioned earlier in this article, traders should avoid searching for the perfect system…
…but this should not block traders from improving their skills.
Traders should keep learning new material to find ways how to improve their trading plan.
At the same time, traders must remain critical about what they add and always remain focused on what elements of their plan are redundant and need to be removed, too.
One of the best methods for learning are
analytics, the library of articles and the live trading webinars available at Admiral Markets.
Evaluations are important not only from the perspective of trading psychology but also for measuring the implementation of these aspects:
Feedback is the key to learning and improving…
…which wraps up our discussion on approaching Forex trading as a business.
In my opinion, these steps are the most important aspects.
But maybe your experience is different?
Let me know in the comment section below.
Cheers and safe trading,
Chris
Source: 9 best steps to approaching trading as a business
Admiral Markets is a leading online provider, offering trading with Forex and CFDs on stocks, indices, precious metals and energy.