Fundamental Trading Advice
Trade With Your Head, Not Over It
Plan your trade and trade your plan: You must have a trading plan to succeed. A trading plan should consist of a position, why you enter, stop loss point, profit taking level, plus a sound money management strategy. A good plan will remove all the emotions from your trades.
The trend is your friend: Do not buck the trend. When the market is bullish, go long. On the reverse, if the market is bearish, you short. Never go against the trend.
Focus on capital preservation: This is the most important step that you must take when you deal with your trading capital. You main goal is to preserve the capital. Do not trade more than 10% of your deposit in a single trade. For example, if your total deposit is $10,000, every trade should limit to $1000. If you don’t do this, you’ll be out of the market very soon.
Know when to cut loss: If a trade goes against you, sell it and move on. Do not hold on to a bad trade hoping that the price will go up. Most likely, you end up losing more money. Before you enter a trade, decide your stop loss price, a price where you must sell when the trade turns sour. It depends on your risk profile as of how much you should set for the stop loss.
Take profit when the trade is good: Before entering a trade decide how much profit you are willing to take. When a trade turns out to be good, take the profit. You can take profit all at one go, or take profit in stages. When you’ve recovered your trading cost, you have nothing to lose. Sit tight and watch the profit run.
Loose emotion: Two biggest emotions in trading are greed and fear. Do not let greed and fear influence your trade. Trading, as any other vocation, is a mechanical process and it’s not for the emotional people.
Do not trade based on tips from other people: Be an informed trader. Trade only when you have done your own research.
Keep a trading journal: When you buy, write down the reasons why you bought and your feelings at that time. Follow the same process when you sell. Analyze and write down things that you’ve done right, as well as your mistakes. Refer to your trading journal; learn and improve from your past mistakes; keep learning and keep improving.
When in doubt, stay out: When you have doubt and not sure where the market is going, stay on the sideline. Do not trade for the sake of trading. Sometimes, doing nothing is the smartest thing to do
Do not over trade: Do not trade for the sake of trading. Ideally you should have 3-5 positions at a time. Anything more tends to be out of control, and turning on your emotions with market changes.
Plan your trade and trade your plan: You must have a trading plan to succeed. A trading plan should consist of a position, why you enter, stop loss point, profit taking level, plus a sound money management strategy. A good plan will remove all the emotions from your trades.
The trend is your friend: Do not buck the trend. When the market is bullish, go long. On the reverse, if the market is bearish, you short. Never go against the trend.
Focus on capital preservation: This is the most important step that you must take when you deal with your trading capital. You main goal is to preserve the capital. Do not trade more than 10% of your deposit in a single trade. For example, if your total deposit is $10,000, every trade should limit to $1000. If you don’t do this, you’ll be out of the market very soon.
Know when to cut loss: If a trade goes against you, sell it and move on. Do not hold on to a bad trade hoping that the price will go up. Most likely, you end up losing more money. Before you enter a trade, decide your stop loss price, a price where you must sell when the trade turns sour. It depends on your risk profile as of how much you should set for the stop loss.
Take profit when the trade is good: Before entering a trade decide how much profit you are willing to take. When a trade turns out to be good, take the profit. You can take profit all at one go, or take profit in stages. When you’ve recovered your trading cost, you have nothing to lose. Sit tight and watch the profit run.
Loose emotion: Two biggest emotions in trading are greed and fear. Do not let greed and fear influence your trade. Trading, as any other vocation, is a mechanical process and it’s not for the emotional people.
Do not trade based on tips from other people: Be an informed trader. Trade only when you have done your own research.
Keep a trading journal: When you buy, write down the reasons why you bought and your feelings at that time. Follow the same process when you sell. Analyze and write down things that you’ve done right, as well as your mistakes. Refer to your trading journal; learn and improve from your past mistakes; keep learning and keep improving.
When in doubt, stay out: When you have doubt and not sure where the market is going, stay on the sideline. Do not trade for the sake of trading. Sometimes, doing nothing is the smartest thing to do
Do not over trade: Do not trade for the sake of trading. Ideally you should have 3-5 positions at a time. Anything more tends to be out of control, and turning on your emotions with market changes.