Most of beginners lose their first investment due to very common mistakes. This post is dedicated to the main directions, that every beginner should work in, developing skills which can help to become profitable in financial markets. These ideas come from the experience, most of these rules must be executed on daily basis. It’s also very important to make the analysis of daily trading, underlying main reasons of possible losses happened. Such a habit could help to avoid the same mistakes in the future, which is the main purpose of learning.
Psychology.
It is the main direction of beginner’s work, it does not have to be on the last place of the list, as many educational courses indicate. “If you cannot control your emotions, you cannot control your money”. Warren Buffett.
Two common features of human being have the most impact on your daily trading results: FEAR and GREED. Fear has different options like ‘fear of missing out’, when traders have a good analysis but open positions too early; and ‘fear to pull the trigger’, when the situation with the analysis is the same but there is no enough willing to make the decision. Greed makes you running for more profits after having first successful deals, and you jump into overtrading or forget about risk management rules.
Traders should not fight with the emotional features of human being, it is impossible. The best way is to CHANGE them with some more useful features. For example, I use logic to deal with my fears. I’m asking several questions to myself before opening any position. Instead of being greedy, I’m trying to be thankful to the market for giving me a profitable possibility.
Think big.
I know it’s not easy to put yourself in a shoes of a hedge-fund money manager, which operates billions of dollars. Especially if your account is small. But I ask myself couple of simple questions before entering the market: “What would I do if I was at such position? Is the current price of an asset attractive enough for me to buy/sell? Or should I wait for a better price?”
Most beginners are like a crowd of small animals, they have the same emotional guidance to run in the same direction. Big market players set traps to catch as many of them as it is possible. Remember couple simple rules: You make profits when someone loses. Buy when there blood in the streets and sell to the sound of trumpets.
Simple analysis.
Traders should avoid overthinking when they analyse the market conditions before entering. This leads them to a point when they trick themselves and get into own trap of complication. Most of the profitable positions have simple explanations. For example, you determine a long-term trend on bigger timeframe, wait for a retracement and join the party. Of course, fundamental and technical aspects have to be taken in count, together with money management rules.
Usually it happens like this. Technical picture draws some setup, fundamental event plays role of a trigger to start the technical setup workout. Traders need to be on the right side of the market and this is exactly the main purpose of your analysis.
Timing.
Let’s say you’re in the market. You have convinced yourself to buy/sell an asset. You have several fundamental and technical reasons behind this decision. All you need is just wait until the price will reach your target. You can close your position if something changes especially on the fundamental front, like a force-majeure or any unpredictable event. But if the environment remained the same, why would you close your position too early?
Profitable math is very simple. Minimize your losses and maximize your profits. Sometimes all you need is just to be patient enough and control your emotions. However, in case if you were looking for a reversal, and the position you entered continues to move in the same direction during a very short period of time like 15-30 minutes, you should admit your mistake and close it. Cause waiting too long could make you stuck with a lose.
Strategy.
Think big.
I know it’s not easy to put yourself in a shoes of a hedge-fund money manager, which operates billions of dollars. Especially if your account is small. But I ask myself couple of simple questions before entering the market: “What would I do if I was at such position? Is the current price of an asset attractive enough for me to buy/sell? Or should I wait for a better price?”
Most beginners are like a crowd of small animals, they have the same emotional guidance to run in the same direction. Big market players set traps to catch as many of them as it is possible. Remember couple simple rules: You make profits when someone loses. Buy when there blood in the streets and sell to the sound of trumpets.
Simple analysis.
Traders should avoid overthinking when they analyse the market conditions before entering. This leads them to a point when they trick themselves and get into own trap of complication. Most of the profitable positions have simple explanations. For example, you determine a long-term trend on bigger timeframe, wait for a retracement and join the party. Of course, fundamental and technical aspects have to be taken in count, together with money management rules.
Usually it happens like this. Technical picture draws some setup, fundamental event plays role of a trigger to start the technical setup workout. Traders need to be on the right side of the market and this is exactly the main purpose of your analysis.
Timing.
Let’s say you’re in the market. You have convinced yourself to buy/sell an asset. You have several fundamental and technical reasons behind this decision. All you need is just wait until the price will reach your target. You can close your position if something changes especially on the fundamental front, like a force-majeure or any unpredictable event. But if the environment remained the same, why would you close your position too early?
Profitable math is very simple. Minimize your losses and maximize your profits. Sometimes all you need is just to be patient enough and control your emotions. However, in case if you were looking for a reversal, and the position you entered continues to move in the same direction during a very short period of time like 15-30 minutes, you should admit your mistake and close it. Cause waiting too long could make you stuck with a lose.
Strategy.
Always remember about your goals. Why are you here? Are you intended to have fun or gamble and become addicted? So why are you crying about your losses in this case? Or do you want to make profits? How much and how long? What is the amount you can afford yourself to invest?
Any success must be planned.
Any success must be planned.
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