Ten Resolutions Every Trader Should Make Every Day
As we embark on the New Year, it’s the high time for traders to reflecting on their previous performances. You may not have achieved your trading goals but the New Year gives you another chance to roll out new strategies and plans for successful trading.
1. Stick to a trading plan
A trading plan defines what you should do, when, why and how to do it. It covers your motivations behind trading, time commitment, the markets you want to trade, strategies and trading goals. Following the rules defined in your plan gives you discipline and further protects you from losses that result from making emotional decisions.
2. Use the 1% rule in a single trade
Under the rule, you should never risk to more than 1% of your account value on a single trade in order. Furthermore, implementing stop losses certainly helps you to evade huge losses. It sets the maximum loss that you can get from a single trade. Setting a stop loss allows you to determine the position size which is aligned with the size of your account. The position size defines the number of shares you take or the number of lots you trade in a forex market.
3. Never risk more than 6% of your account capital
In order to prevent drowning of your trading capital, always take precaution when making risks in forex trading. Risking too much of your capital can have devastating effects on your account and trading as a whole. Since the market is highly volatile with unexpected changes, ensure that 6% of your capital does not go into risks. This goes a long way in protecting your trading account.
4. Use a high probability trading strategy
This is a key new year’s resolution for traders. High probability trading is trading only where there is a very high chance of making maximum profits. High probability setups have larger time frames and support and resistance levels. The strategy enables you to acquire necessary virtues like patience and discipline which are necessary for success in trading. This is because trade setups take long to form but can give you a reap of profits if you jump in at the right time.
5. Never cease learning
Always take your daily trading experience as a lecturer hall from which you learn something different. It takes years for investors to sharpen their skills. Therefore, just know that the skills and methods you have in mind are not enough to bring out the best experience and profits for you. Other than using your own trading experience, you can also get learn from a mentor or reading articles, journals, and books about trading.
6. Have a trailing stop plan
Having a trailing stop plan leaves guesswork and emotions out of trading and gives you a concrete plan through which you can make maximum profits from any trade. Simply put, the stop plan calculates mathematically where to sell to gain maximize profits or reduce losses. It protects you from devastating losses by setting the price at which to sell in case the stock prices reduce. It also prevents you from holding on for too long in case a nosedive happens after a spike. This helps you to lock maximum profit.
7. Stick to one method of trading
This can’t be stressed enough. Jumping from one style of trading to another leaves you confused and unable to decide which method works for you. This could explain your struggle in reaping profits in the money market. Every style has its share of losses and hardships. Therefore, focusing on one through thick and thin will help you master its strategies.
8. Never predict the market
Stock trading is a hugely volatile venture. Anything can happen at any time. Therefore, any attempt to predict how the market or individual stock will move should be sincerely discouraged. That said, I strongly recommend you take hold of things you can control and follow what the market says. As an investor, you can only control what you buy, how much of it and at what price to buy it.
9. Trade in the overall direction of the trend
Things do change quickly in the stock market. A spike can suddenly be followed by a nose-dive. Therefore, it will require you to check for the general direction in which the market is headed to. This will prevent you from making a hasty decision which can make you miss a chance to make a huge profit. Visual observation is the key since it gives you a clear picture of the highs and lows.
10. Never give up
Giving up is the worst mistake you can make in the stock market. Maybe you have been trading for weeks or months and have not achieved the results you expected. It’s not the time to surrender. Simply give yourself some time to reflect on your mistakes while owning your results. Write down the reasons you are into trading and aim at correcting your mistakes. This will energize you for a comeback.
Taking the above New Year’s resolution for traders will certainly help you get the best trading experience.