Many new traders come into it not really knowing much about it, they have often seen or heard something about it, something that is a great way to make a bit of extra money on the side, or even as a carer. Coming into it with this expectation or lack of knowledge can put you on the back foot right from the start. Another issue that comes with this is a lack of understanding of the process and also a number of bad habits, nothing against the person, but certain habits come in with new traders. Due to this, we have come up with a list of habits that you should try and get into as a new trader. They will help in your trading and also with your chances of becoming a profitable and successful trader.
Using a Trading Journal
We appreciate that you may not actually know what this means, as someone coming into trading it may have been mentioned but it is becoming more and more apparent that people are not using them and this is a big negative against their trading. A trading journal is simply somewhere that you jot down everything that you do, and we mean everything that you do, the trades you make, the reasons behind them, the results, and more It then gives you the opportunity to look back at toys trading to see that you have been doing well and what you need to work on. It is an invaluable tool, so the sooner you get into the habit of filling one out and then keeping it up to date, the better your trading will develop.
Using Stop Losses
Part of your trading plan should have been a risk management plan. This would include using stop losses which are a way to automatically close trades when they go a certain distance into the negative. Using them is a habit that you need to start getting into, the amount of money that they could potentially save you is incredibly high and they can even save an account entirely. Losses are a part of trading, you will have a lot of them, especially as a new trader, so being able to limit those losses and to control the amount that is being risked each trade is vital. You cannot control the markets, but you can control how much you will potentially lose with each trade. It is ok to widen or tighten those stop losses as things go and as the markets change, but the one thing you must do is have them in the first place.
Set Trading Times
The markets work 24 hours a day, but that does not mean that you need to work those hours. Give yourself some set times when you want to be trading, having these set times will help you to keep concentration and will also ensure that you are not wasting your time. Don’t try and trade all your free time, treat it like a job, work certain hours and it will be easier to keep those times in the future, and to keep your discipline.
Preparing for Trades
Having your trading plan and strategy all set up before you start trading can make things much easier now and also in the future. If you start trading without a plan then what are you actually trading? You won’t know which means that the majority of your trades are going to be bad trades, whether you know that or not, there will be far more losses than wins. Having your plan will also set out certain trading rules for you, these rules are what you will follow with each trade, doing so keeps you in line with your strategy and as long as your strategy was created properly, it will help you to become profitable and successful in the long run. Having things planned beforehand also helps you to prepare and cope with the results on a psychological level which can keep you happy and will help to lower and reduce stress levels which is a major psychological issue when it comes to trading.
Forex and trading as a whole is a huge beast, there is so much to it that if you try to do a bit of everything then you will be overwhelmed and won’t be able to do anything to a decent level. You need to be able to specialise, to pick a certain trading style and certain instruments that you wish to trade. This will then allow you to pinpoint your strategy, to get it working well for those particular instruments and timeframes. If you are a scalper, then there is no point trying to place some swing trades, stick to scalping, specialise in it and you will have a much better chance of being successful.
So those are some of the things that you can be doing as a new trader, not everything will work for you, in fact, many of them may not, but the more habits that you try to get into the easier and quicker your trading will become. Even if you do not get into three specific habits if you notice a bad habit that you are doing (and there will be some) try and get out of it before it really sinks in and you are stuck with it for a long time.