The ‘Do’s and Do-Not’s’ When Trading The Financial Markets
The surprising fact about trading the financial markets independently is you first have to go through what doesn’t work in order to establish a method that does work! Every self-taught successful trader will tell you the same thing.
Firstly, the things not to do when trading the financial markets is attaching emotions when making trade decisions. As humans, we naturally have that attachment to money, the loss of it affects us in various ways. One of the worst ways is when making a loss on a trade without the structured risk management plan that is highly advised. This leads to the beginner losing 10-20% of their account and sometimes more. The next obvious thing in the beginner’s mind is to at least cover their loss by breaking even. As you would expect, this then makes the trader enter into riskier trades, without no set ups and worst of all still without no risk management. I mean, the ‘lucky’ ones actually manage to get their accounts back to square one (even though they suffer with potential heart attacks sitting behind their screens in the process). However, when the majority of beginners do this they begin to lose even more money – picture a mouse attempting to catch its tail. This then programmes into their minds that trading is ‘gambling’, then why are others making ridiculously sums of money from it?
A lot of individuals who e-mail me regarding joining the member zone usually have the same issues when it comes to their trading. A very common one is usually chasing the money, rather than exploiting the technical or fundamental opportunity whenever it presents itself. It is crucial to judge people based on the questions they ask, as oppose to their answers. The most common question that beginners ask is ‘’How much do you make a day’’. Trading is not a field that has a ‘daily, weekly or monthly’ fixed amount. Failure to understand this important fact usually leads to over trading and over risking their accounts. Any experienced and successful trader knows well that financial trading is about exploiting opportunity, not chasing the money. Personally, there are certain weeks I will not place a trade until Wednesday, meaning Monday and Tuesday there was nothing made. However, those who have real experience in the financial markets know that there are endless profitable trade opportunities in the financial markets within a calendar month. With this being said, there can be a week that begins with two days of no profits, with the other 3 days of profits and another week with daily set ups from Monday-Friday yielding great returns. Experienced and successful traders are forced to learn how to be patient, the financial markets definitely favour those who are patient.
Think of your trading as a business, because it is! It is crucial to think long term, embrace exponential growth. Never “chase the money” rather wait for the trade set ups to present themselves, when they do it’s obvious! Never depend on anyone or anything for your trading success. If you are being taught by a successful and experienced trader, ensure you study and absorb all the information you have been taught so you can be self-reliant in the long term, this way you will never need to depend on anyone other than yourself.
Now the most important things to do whilst trading the financial markets are quite straight forward. The underlined question is, will you do it?
Firstly, remove the previous programming of your mind that adopts the mentality that ‘Money’ is hard to make and a huge effort has to be put in towards obtaining it, because it doesn’t. Especially with all the Quantitative Easing and other stimulus programs that each central bank of every nation is carrying out. There is in fact MORE ‘money’ in circulation than there was 15 years ago. It all begins with conditioning and perspective.
With regards to trading the financial markets, follow what works for you, stay loyal to all the rules you have learnt in your journey and you will be sure to do well over time. Understand that this business includes risk to your capital, and each trade you make exposes risk to your capital – ensuring your risk management is set at a structured percentage rate is crucial. Risk management is what protects you from unnecessary downside drawdowns on your trading account, and most crucially it eradicates the emotional attachment to ‘money’ as it is easier to emotionally deal with a 2% loss than a 20% loss, I’m sure you would agree with this. Your capital is your ammo, so to speak and pretty much in the majority of businesses. Risk management ensures you do not run out of it.
As mentioned in the Golden Seeds FX booklet guide, I highly advise beginner and even intermediate traders to construct a trade journal in which you can analyse each trade taken – and also identify strengths and weaknesses. This definitely also contributes towards learning more about yourself, and what specific trading style works best for you, or even which specific markets are your favourite instruments (because every trader has favourite trading instruments). Adopting this has endless benefits which you will discover yourself when you begin to apply it in your trading career.
If you do not know by now, checking the weekly economic calendar for high impact news releases is very important, especially whenever you are in a live position. There are occasions when the fundamental news releases coincide with the current technical formation that is occurring, however it takes a high level of trading experience to identify when this is happening. With that being said, I would not advise you to stay in a position during any high impact news unless you have relevant experience.
Mentorship is the fastest route to success in any field of endeavour. However, some may decide to learn and perfect their trading methods and financial market cycles independently (like myself). The most crucial advice I would give to all those attempting to learn independently is to focus on the skill, the necessary knowledge that has to be acquired and the mentality that has to be adopted before the money. These are just the 3 main ones. Once you’ve perfected this, the money will obediently follow you. Understand that trading the financial markets is like a business. With strict management rules, it doesn’t matter if you are down 2 or even 4% for three days; all that matters is the overall gain within a calendar month/quarter/year that the market will yield you. Think long term.
All in all, the rules are pretty much straight forward, following and staying loyal to them is when it gets slightly tricky. Those who choose trading as a career path and are adamant about succeeding in this field will ultimately be forced to follow all the rules. Detach emotions when making trading decisions, and think long term exponential growth.