You probably got into trading because of the endless possibilities it brings. Financial freedom, passive income, wealth machine.
So without wasting time, you dive straight into trading. You open a new account, fund it with a few thousand dollars, and start trading immediately.
Before you know it, you’re already making profits and you think to yourself:
“Wow, it’s not as hard as it seems.”
Then, something strange happens. The market starts turning against you. You start losing your profits and more. This agitates you. So, you start trading bigger and more often. Revenge trading they call it.
Slowly… your losses got larger and it wipes out all your capital. You’ve got nothing left, except anger and frustration.
It’s only then you realised…
“Wait a minute, what’s going on here?”
Welcome to the world of trading. The hardest easiest money you’re going to make and it’s going to take everything you’ve got. If you treat this as a hobby, look elsewhere, there are cheaper alternatives.
But if you’re serious about this business, then today’s post is for you because you’ll learn 7 practical trading tips that improve your trading results.
Are you ready? Then let’s begin…
1. There Are Many Ways To Skin A Cat
Warren Buffet, considered the world’s greatest investor, invest based on fundamental analysis only.
Ed Seykota, considered the world’s best trader, trades based on technical analysis only.
Mark Minervini, a stock market wizard, trades based on fundamentals and technical analysis.
So what’s my point?
My point is, there are different ways to speculate in the markets. You need to find a trading approach that suits your personality, schedule, and lifestyle. It doesn’t make sense to be a day trader if you have a full-time job, right?
2. Don’t Abandon Your Trading Strategy After A Few Losing Trades
Because no matter how good a trading strategy is, in the short run your results are random.
And this can be explained using the law of large number…
If you take a coin and toss it 1000 times, you’d get close to 50% heads and 50% tails.
However, if you toss it 10 times only, it’s unlikely to be 50% heads and 50% tails due to the small sample size.
And it’s the same in trading…
You cannot conclude a trading strategy doesn’t work based on a small sample size because, in the short run, your results are random.
Instead… execute your trading strategy 100 times to find out whether it has an edge in the markets. Don’t be fooled by randomness.
3. Stop Looking For Trading Tips
Here are 3 reasons why:
- You’re late to the party
- You don’t know when to sell
- You don’t improve
Let me explain…
You’re Late To The Party
By the time it reaches you, the “insiders” are already in position and are looking to exit their trades. This means you’re buying from these traders looking to sell. Now, think about this… how many times did the market reverse after you bought on tips?
You Don’t Know When To Sell
Okay, perhaps your tips are reliable. But that’s not enough, why? Because you don’t know when to sell. Entry is one thing, but your exit determines whether you make a profit or a loss. Without knowing when to exit, your tip is like tossing a coin.
You Never Improve
You receive a trading tip from a trusted friend, saying that stock ABC is going higher over the next few days. You immediately long 10,000 shares of ABC. Over the next few days, nothing happens, but you hold on anyway thinking it’s a matter of time price goes up.
Suddenly, stock ABC collapsed on news that it’s on the verge of bankruptcy. Your 10,000 shares are worthless now and you lost most of your money.
Then you blame your friend for such an event and he’ll claim he was a victim as well. And the funny thing is, the next time he gives you a tip, you’ll still listen to him. Why? Because there’s no accountability check. If anything goes wrong, you won’t blame yourself, but your friend.
Here’s the thing, trading on tips will never make you a better trader. If you want to improve, own up and start being accountable for your actions.
4. Trade With A Plan
Look: If you’re going to war, are you going to fight with shorts, slippers, and perhaps a spoon? Of course not. You’ll have a plan of attack, identify the areas you want to fight from, the areas you’ll defend, the amount of ammunition required, the logistic support, your food supplies, your contingency plan, etc. And even the best-laid plan is no guaranteed of success. Thus, you must know when to call it quits and retreat.
Now, trading is like going to a war. You must trade with a plan. You must use the correct tools. You must know the levels you want to trade from. You must know when to exit your losing trade. And you must live to fight another day.
These are 7 questions you must ask yourself…
- Which time frame are you trading
- Which markets are you trading
- How much will you risk per trade
- What are the conditions of your trading setup?
- What is your entry trigger
- Where will you exit if you’re wrong
- Where will you exit if you’re right
If you want to learn more, go read How to be a Successful Trader (a Step by Step Guide).
5. Trade With The Trend
There’s a saying… “The trend is your friend, till it ends.” This means if the market is trading higher, you want to be long. And if the market is trading lower, you want to be short.
This principle applies to any markets and timeframe you’re trading. Whether it’s stocks, forex, futures, bonds, etc.
Let me explain…
The chart below shows the EUR/GBP on a daily timeframe. You’ve got 5 possible entries, which do you prefer?
I’m pretty sure you’ll choose c, d, e, right?
Because you’re trading with the trend which gives you a higher probability of your trades working out.
6. Have Proper Risk Management
Let me tell you a secret.
Losing traders assume that trading systems and strategies are the most important. But the truth is, they are not. Why?
Because without proper risk management, even the best trading systems or strategies isn’t going to save you. Let me prove it to you…
Let’s assume you have a trading strategy that wins 70% of the time and loses 30% of the time — and you make $2 for every dollar risk.
You start with a $10,000 trading account, and the outcome of your next 10 trades is: Lose Lose Lose Win Win Win Win Win Win Win
You’re an aggressive trader who believes in go big or go home. So, you risk $4000 on each trade and you lost everything by the 3rd trade (-4000, -4000, -4000).
But what if you’re a responsible trader, who risks $100 on each trade? How would that change?
Well, you made a gain of $1100 (-100, -100, -100, 200, 200, 200, 200, 200, 200, 200)
Now, can you see why risk management is important? Because without it, even a profitable trading strategy isn’t going to make you money in the long run.
7. Learn From Proven Traders
You’ll probably agree that…
It is difficult learning how to trade. You’ve got books, forums, videos, courses, seminars, etc. And if you search “how to trade the markets” on google, you get 14.9 million answers.
“How do I get started?”
“How do I filter out the noise?”
“How do I know what works and what doesn’t?’
Now… won’t it be great if there’s a way to filter out the noise, and focus on the stuff that really matters. That will reduce your learning curve, right? Well, I’ve got good news for you…
Because on the 15th and 16th October (Saturday and Sunday), I’ve asked a few Professional traders to teach you their best stuff, free.
Forex trading? Covered.
Stock trading? You bet.
Swing trading? Of course.
Day trading? Managed to find one.
Wrestling? Not included.
Over this 2-day online event, you’ll learn practical trading strategies and techniques which will improve your trading results. Here’s a glimpse of what you’ll learn:
- How to trade full-time and travel around the world
- How to find high probability intraday opportunities (in less than 60 seconds)
- How to increase your win rate and improve your risk to reward (on every trade)
- How to “decode” the inter-bank and become a profitable day trader
- A swing trading strategy that generates a consistent income
- And much more…
Here’s the thing:
It doesn’t matter if you’ve been a losing trader, breakeven trader, or someone who’s just starting out. TradersFest will give you the edge you need to succeed in this business. And the best part?
This event is Free for you. So, if you’re interested, click here to claim your spot now.
Summary Of What You’ve Learnt:
- There are different ways to trade the markets. You need to find a trading method that suits you and your lifestyle
- Losses are part and parcel of trading. Don’t abandon your trading strategy after a few losing trades
- Stop looking for tips because you’ll never improve as a trader
- Trade with a plan so you can trade with confidence and improve your trading
- The trend is your friend till it ends
- You must have proper risk management if you want to survive in this business
- Learn from proven traders to reduce your learning curve
If you want to take your trading a step further, then you’ll enjoy this Free 2-day online event where you’ll learn practical trading strategies (from 6 Pro Traders).
Rayner Teo is an independent trader, ex-prop trader, and founder of TradingwithRayner.
He is the most followed trader in Singapore, voted Top 5 most helpful traders on Twitter, with more than 21,000 traders reading his blog every month.