New Trader Basics
Start with a strong foundation before you build your trading business.
Begin by learning some basic trading concepts that all traders should know but few practice. No matter what you trade or what trading style you use:
1. Use a Trading Plan.
You must have a clearly defined set of rules before you place any trade. This will help prevent trading by emotion and resist temptations to over-trade or to do something other than you planned.
Often your emotions will tell you to do something against your trade plan. In order to help resist the emotional stresses that are constantly present in speculative trading, be disciplined to stick to a trade plan no matter what you feel like doing. The Shark Den will reinforce your discipline.
2. Be confident in your trading decision or don’t trade.
If you are uncertain about a trade position, get out of the position… at a loss if necessary. It means that you are not confident in your trading methods, don’t have the statistics to support and have not spend enough time evaluating your results.
Always use protective stop orders in each of your trades. Otherwise, you increase your probability of a much larger loss by letting your emotions tell you when to exit.
3. You cannot afford to win, if you cannot afford to lose.
Financially you need to be in a position where you are able to accept a loss. Welcome a loss as it is expected. It is a natural part of trading. If you are not in a position to accept a loss, then you should not be trading.
Trading should be done with funds that are risk capital and not vital to your daily living expenses.
4. Let your profits run and cut your losses quickly.
It would be foolish to expect to win every trade every day. In futures trading, if you have the proper trading techniques, you should be able to be right on the right side of the market only part of the time and still show a profit. Be able to cut your losses short and let your winners run. This will come with time and experience.
Start out small and grow your account gradually so you can trade with more contracts as your account size grows. This will allow you to trade with runners, increasing your potential profit exponentially in the future.
5. Be patient.
Most traders who fail, set limits on their profits and no limits on their losses. Human nature forces you to want to take your profits right away. By being patient, you can take higher profits later. This is called, “allowing the trade to cook.”
Taking a small loss does not necessarily mean that you were wrong in your approach. It simply means that your timing was off. If you take a large loss, learn from it. Learn what you can do better next time.
DO NOT carry that loss with you. In other words, put that trade out of your mind for the moment. Be prepared to re-enter a trade when another opportunity presents itself.
6. Be prepared for the next trade.
Many traders get shaken up emotionally when they take a small loss. If you let that happen, you will not be ready when the market presents you with another trade setup. Keep your stops and your profit targets in place. Get over the last trade quickly and be prepared for the next trade to setup.
If you get stopped out in one direction, that is often a shake-out in that price action direction. That is done in order for the professional traders to move the market in the opposite direction. Get over the last trade quickly and be prepared to enter the market again if the market gives you another entry setup.
If you already have a trading plan, then you are way ahead of most other traders.
If you do not have a trading plan, the best way to get started is to join a trading group. If you like their methodology, then modify that trading plan to fit your style.
The TraderShark Trading Manual gives you that flexibility and the Shark Den may be able to help you with detailed explanations and live daily setups and triggers. Take your trading to the next level…
CFTC Rule 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.