Get In Tune With The Markets
This is a list of some tips I have developed over the years to make sure that my trading is successful. I know that I can never expect to win every trade but I can strive to win as many as possible, to limit my losses and basically to make sure that I am as ready as possible to make good trading decisions. I have categorized my list into 4 sections; longer term prep, short term prep, what you might not consider and things I never do.
Longer Term Preparation For Trading
- Education is the root of success for any endeavor. The more you know, the more you learn, the more you mature as a trader the better you will be. Education is not limited to tools or strategy but also includes fundamental analysis, market mechanics, economics, trading psychology and any other subject that helps you to grow. Education never should never stop, you should always seek out new information. Each new angle you learn will give you a new insight to the market.
- Strategy is how you make trades. Your strategy is the framework that guides your actions. I always stick to my strategy to ensure that I am not making random or knee jerk trades. It’s OK to use more than one strategy, or a combination of strategies so long as you can keep them organized. Using a different account for each strategy is one way to do it.
- Money management is how much I trade. Money management is the key to long term success no matter how good a trader you are. By keeping your trades small you never risk your whole account on one trade, or one streak of bad trades. By keeping your trades set to a percent of your account you can make sure you never trade too much while also allowing your trade size to grow with your account. The average successful trader will risk between 1% and 5% of their account. 1% is a very low risk tolerance,5% more risky. I use the 2% rule as a standard for the Geek Account, my weekly tips column on BinaryOptionsThatSuck.com.
- Fundamental analysis is the study of the economy, business and market conditions. It is crucial to understand the underlying fundamentals of the market in order to better understand trend and how the market might react to a change in those fundamentals. I follow economic data on a week to week basis, it’s not important to become an economist, just to keep up with it the same way you do the local sports scores. Think of it as keeping score on the economy, when things are good the bulls are winning, when they are bad the bears are winning.
Short Term Prep
- Checking the news is the first thing I always do. I use a variety of sources including email alerts, a news app on my phone, the TV and the internet. I always wake up, at least on trading days, by 8AM eastern time so that I have time to catch up on it all while drinking my coffee with leisure. I check up first on Asia, because the trading day starts in the East. I move on the Europe because those markets are open in the early part of my day, ahead of the US open. After that I move on to domestic news and then drill down to any specific reports or stories I want to know more about.
- Checking the charts is the last thing before making a trade. I browse through, always before the opening, looking for the asset I think is best for day trading and longer term signals for the Geek Account. I am a trend follower and make all my trades based on trend following signals, which include corrections and reversals, depending on the time frame, asset, analysis etc. I never force a trade on a chart, either it’s there or it isn’t. If it isn’t then I move on to the next and the next until I find the one I like all the while waiting for the signs to develop.
What You Might Not Consider
- Rest is very important to trading well. Staying on top of the market is mentally challenging and requires plenty of sleep and good nutrition. You need to be sharp and staying up late is not how you stay sharp.
- If you treat trading like a hobby, or a game, it will treat you the same way. Hobbies may make you money but you don’t get rich on them whereas a game, if you lose who cares, it’s just a game. If you want to have real long term success you have to treat trading like a business, make good trading decisions for your business, manage your business’ money well and it will take care of you well.
Some Things I Never Do
- I never let my account balance influence my trading. It is easy to be tempted to trade too much, or too often, or too risky, or all of the above, for both greed and fear. If you are winning a lot you may want to win more, and more. If you are losing a lot you may want to try to win it back quickly. You need to know your balance so you can apply money management but you must always follow your risk management rules.
- I never let my open trades affect my trading decisions. Sometimes I may have 5 or even 10 trades in the red. This can be quite discouraging and I admit, is something hard to ignore. I don’t ignore it, I just don’t let it bother me. I know that over time I win more than 60% of the time, I also know that my money management is protecting my account like it always does. I usually don’t even know that I have a losing month until after it happens and I tally up all the trades that closed in that month.
- I never trade more money than my risk percent. I never trade less money than my risk percent. I always trade my 2%. If for some reason that I can’t trade exactly that amount (broker trade size/increments for example) I will round up, not down.