By Warren Seah
Trading can be a bit precarious. For so many, it’s an incessant accumulation of frustrations– the trade may not always go in your favor, you foolishly bought into some “expert’s” advice, you’re unsure whether you should close a losing trade or sustain it. It’s a business where your success will be nebulous. If you follow these five tips that I prescribe, however, you will have the upper hand.
Have Sufficient Capital
A general rule: You can never have too much capital to start with; you can, however, have too little. Think of trading as building muscle. You can’t effectively build muscle (wealth) without the right amount of body mass (capital.) Your efforts will be scrawny, weak. To start with, it’s best to have about $100,000. If you don’t have that, try for $50,000-75,000. Why this much? The more money you put in your trades, the more money you will get in return.
Manage your Risk
This is a biggie. Through the management of your risk, you will sink or swim. It’s here that you either grow the capital that you have or deplete it entirely. Unfortunately, many traders commit the latter. It’s Money Management 101. As a rule, you do not invest too much on one trade (too much would be as little as .) When you put all of your eggs into one basket, you’re bound to lose. Also, you might want to put a stop loss on your trades. This protects from massive loss that can literally render your account barren. This is a common tool of risk managements; if used, you will be grateful for its practicality.
Know What you’re Using
If you look on most traders’ charts, you will see a byzantine network of indicators and patterns, often packaged together as a convoluted, distorted mess. If asked how this helps them in their trading, many will struggle to find the answer. Do not overpopulate your chart with useless appendages and accessories. You won’t need them. For instance, a good indicator is a triangle chart pattern. It, as its name infers, finds patterns in trades (ie trends, the direction of the trade, the overall interest of other traders.) Triangle chart patterns will track the journey of a trend with the ascending, descending, and symmetrical triangles.
If used sparingly, indicators such as these will benefit the trader who seeks more clarity in his chart.
In closing, it always helps to have a trading plan or strategy. Adopt or create a trading style or method, test it out, make adjustments and alterations. If it can produce the results you want, don’t stray away from it. Deter human emotion from the trading process (fear, excitement.) This is a business, a precarious one. But, if treaded carefully, it can yield awesome results.
About the Author
Warren Seah
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