Trading is a profitable venture, even for beginners. However, it’s not a get-rich-quick scheme. Success in trading requires discipline, patience, and a solid strategy. If you want to become a better trader, you’re in the right place.
In this post, I will go straight to the point. From trading rules and strategies to managing risk and capital, I will give you direct tips to improve your trading skills and achieve better results in the market.
So, here we go!
1. Develop a Set of Trading Rules
This part talks about making plans before you get into the market. These trading rules will help traders and investors to be disciplined.
When you want to invest, there are lots of assets and opportunities. Also, in the same way, there are many uncertainties and ways that can lead to failure in trading. Develop a set of trading rules and you’ll see an improvement in your performance.
And while you do that, remember to follow them with no compromise. Above all, don’t lie to yourself.
2. Build a Reliable Trading Strategy for the Long Term
Whenever traders and investors hear of “Trading Strategy” the next thing that pops into their mind is fast profits. That’s not usually the case.
Here’s a Reality Check: Not all trading activities and investments will always result in profits. Some will yield profits, and some will not perform to expectations.
That’s where a reliable trading strategy comes in. No matter what you go through in the market, at the end of your trading activities, it will still give you an edge over your lost trades.
This is much better than trading randomly without any strategy.
3. Increase your Trading Knowledge
No one knows it all. To be a profitable and better trader, you need to embrace consistent learning. Here are five simple ways to improve your trading knowledge.
- Study market data and trends
- Learn from successful traders
- Take online courses and tutorials
- Read trading blogs (like this one)
- Join trading communities and forums
- Subscribe to our youtube channel here
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4. Have a Financial Backup Plan(s)
Every day is not Christmas. You won’t have a winning trade (profit) every single time you go into the market.
That’s why traders and investors must have at least one alternative source of income. This will help you avoid frustration, anxiety and pressure resulting from bills you have to pay, (such as feeding, accommodation, data bundle and other expenses).
For example, let’s consider Mr X. He’s a trader who has no alternative source of income but needs to pay his rent next month. If he carries that thought into the market, he can make some bad investment decisions.
Because he’s under pressure, and this could lead to greediness, which could make him go against his trading rules.
That’s one of the reasons why many traders and investors fail. To become a better trader, you need a clear mind. An alternative source of income brings you one step closer.
5. Learn to Save/Invest your Profits
As I said earlier, you won’t have a winning trade every day. And when you finally do, you should get the most out of it. That means not spending lavishly.
If you save or invest your profits, it will serve as financial backup for rainy days when you struggle to get winning trades. Here are some things traders can do for a financial backup plan.
- Invest in real estate
- Start an online or physical in-store business
- Host paid online classes on Forex, crypto, etc
- Create a trading blog (and monetize it with ads and affiliate marketing)
Continue Reading: How to Reinvest Your Profits as a Trader
6. Understand That Trading is Not a Get-rich-quick Scheme
There’s no instant or overnight wealth in trading. Please don’t be deceived. If trading is as easy and predictable as many claims, then most 9-5 workers would have quit their day jobs and started trading Forex/crypto.
The market goes up and down with lots of uncertainties. Never forget that.
7. Have Enough Starting Capital
If you’re trading for fun, to learn or as a part-time activity, you can skip this. But if you want to make trading your full-time job and primary source of income, you have to start with a big amount of money.
In trading, risk and money management are very important. As a rule of thumb, whenever you’re about to trade in the market, don’t risk more than 1% of your funds. This is known as the 1% risk rule.
This means if you have $2,000 in your trading account, you shouldn’t risk more than $20.
Now if you have just $300 in your trading account, you might be tempted to invest more than 1% (to win a big profit). If you lose that trade, it means you just wasted your precious money.
Point of Story: A low capital will affect your ability to trade in certain situations. Also, it can tempt you with greediness, whereby you risk more money with hopes of winning big.
If you’re a trader struggling with capital, you can seek help from a prop firm company. A prop firm provides traders with access to capital, in return for a percentage of the profits generated. This can help you become a better trader.
You Might Be Interested In: How to Get Funded as a Trader
8. Join the Community of Traders for Support and Networking
Trading can be a solitary pursuit, but that doesn’t mean you have to go it alone. Joining a community of traders can provide you with valuable support, insights, and networking opportunities.
Here are some benefits of joining a trading community
- You will learn from others
- Stay up to date on market news
- Get support and feedback on trading issues
- Helps to kill boredom and relieve stress during trading
9. Discover your Strengths and Weaknesses (Based on Trading Methodology)
Some traders hold trading for days, while some can’t even hold for 4 hours. If you want to become a better trader, you have to first discover what kind of trader you are, and what kind you want to be.
If you’re an impatient trader who doesn’t want to take your eyes off the charts screen, or someone who wants to trade all the time, then day trading is best for you.
- Day trading involves buying and selling within the same day (or within a few hours, minutes or even seconds). A day trader wants to capitalize on short-term price changes.
If you’re a patient or busy person, swing trading is probably best for you.
- A swing trader makes trades based on changes that take place over days or weeks and capitalizes on long-term price changes.
Note: After discovering what kind of trader you are, understand the perks and risks attached to it.
Perks of Day Trading
1. Flexibility to set your own schedule.
2. You can see all moves and notice swift market changes.
3. Unlike swing trading, day traders won’t trade overnight. This means you won’t be exposed to the risks that can occur when the market is closed.
4. Day trading requires very little capital to start.
5. High returns on their investments, although this comes with higher risk.
Cons of Day Trading
1. Very time-consuming.
2. Day traders may incur high fees from frequent trading, including commissions, bid-ask spreads, and platform fees.
3. While day trading may have high rewards, it also has a sharp potential for quick and large losses.
4. Emotional, psychological and medical stress.
5. Day trading can be addictive, as the potential for quick profits can create a rush that leads to compulsive trading.
Read More: Best Broker For Day Trading
10. Final Tips
- Trading and investing is not predictable activity. It’s based on probability, and there are almost no certainties. Always have that in mind.
- Your profit is not determined by the number of trades you make. It all depends on the number of quality trades.
- The higher the winning probability a trade setup has, the higher the chances of getting high rewards (and vice versa)
- Do not lose more than what you profit. Instead, win more than what you risk.
- Have a healthy risk and money management system in place. This helps you to beat the market even if you’re a beginner or intermediate trader.
- Imagine a trader executed 10 numbers of trades risking $100 for 1X value, if he/she loses 6X value trades, that will cost $600. If such a trader has 4 winning trades targeting 2X value of $100 as take profit then that will be $200 on each winning trade and for 4 winning trades that will give $800. Despite losing 6 trades ($600 for 6X-times 1) and winning 4 trades ($800 for 4X-times 2) he still gained $200 in profit.
- Even with the 40% winning rate, traders can still be profitable in the long run if a good risk and money management is in place.
- All work without play makes Jack a dull boy. Create time to enjoy what you love doing. This can be gaming, cycling, gymnastics, religious activities, etc. This helps you become emotionally balanced to compete in the market.
- Never stop learning. Join our community of traders here on Telegram.
Read Also: Differences Between Risk and Money Management in Trading
Becoming a Better Trader
Becoming a successful trader takes time, learning and a strong resolve. When you set rules, don’t compromise. You also need a reliable trading strategy and a good understanding of risk and money management.
Remember, trading is not a get-rich-quick scheme, and success requires increasing your trading knowledge, saving your profits, and starting with enough capital. You rock!