MoneyTec Traders Community Forum - View Single Post - Advice for Novice Traders courtesy of fx-pro.com

peteuk · 12-11-2003, 07:26

I came across this article thought it was worth posting here....

Please note: I have no connection with fx-pro therefore cannot vouch for their reliability as a broker

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Advice for Novice Traders

1. In order to become a successful trader you must have sufficient risk capital the loss of which (or parts of) will not completely destroy your morale - you must be able to hle this ordeal calmly this should not effect your lifestyle in any way. Your mind should be on the market not on your finances. You must concentrate on the task of trading must remain calm in order to make the proper trading decisions. You should never use the last remains of your finances for trading - the responsibility the pressure would be too great your mind would stray towards your finances not towards the market situation thus greatly increasing the possibility of mistakes.

2. Don't rush to open a real account after only a few days of practice. Practice for as much time as necessary for you to feel confident on your own. Do not compare yourself to other traders - just because it took them a certain amount of time doesn't mean you don't need more. Your primary goal in this practice is to develop an individual trading style or technique such that at the very least your next week's trade earnings are not less than this one's your monthly earnings should increase every following month. Only after achieving this result should you open a real account.

3. When the amount of winning trades surpasses the amount of losing trades your account balance is increasing you have achieved a positive result in trading. However if you have 5 losing trades for $2000 total 1 winning trade for $3000 that is nothing to brag about since you probably made it through only by luck or by the fact that you took an insane risk to use the imum number of lots for your trade. You should never depend on luck . Not on the market - eventually your luck will come to an end.

4. Its not enough to achieve the above results on your demo account. It is equally as important to underst why it happened to develop your profit-making individual trading style. Intuition is very important but basing your trading decisions solely on intuition is unacceptable.

5. Set up strict limits for your losing trades so that you don't lose more than you can hle. These limits should be within 3-10% of the total sum of your account depending on its size. If the market starts going in the wrong direction don't try to think of excuses why you shouldn't close that position - as soon as the losses reach your set limit immediately close the position. Even if the market starts going in the right direction 5 minutes later you have eliminated the risk of it not turning around. You will make such trading rules so that you could trade by them not try to go around them - you would only be hurting yourself if you did.

Remember that if your account contains less than $3000 you should not trade using more than one lot. If $3000-$5000 - never more than two lots but only trade two lots only if it is looks safely in the current market situation. If you have $10000 on your account you may trade two lots but never more than three. If you follow these rules you will considerably limit the risk factor. Trading too many lots at once would be dangerous unwise.

6. One of the most deadly mistakes a trader may commit one which shall destroy everything is when the trader (after already losing $200 on a position) begins to think of excuses not to close this position - perhaps the market will suddenly turn around move in a favorable direction? The trader keeps thinking of this doesn't have the heart to close the falling position waiting until this happens. The market does not do any favors for anyone. Eventually the trader will be d to close the position with losses of $1000 or even greater. Not only will the trader lose money they will lose morale too. They will lose confidence in themselves their decisions. The reason for committing this mistake is simple - greed. Losing $200 doesn't hurt your opportunity to not only make up your losses but also make additional profit. Losing $2000-3000 in 1 or 2 trades you completely destroy your opportunity to earn further money! In order to avoid this trouble you must follow a simple rule - never go over the risk limits you set for yourself. Close your positions immediately when your losses reach these limits!

7. The less money your account holds the less money you can lose in a trade the greater that trade's value is to you. Because of this you should avoid opening a real account with $1000 - its just not enough because just like a "spy" you can't afford to make a mistake you don't have the right to make a mistake a mistake is fatal. On any market there is no such trader even the most experienced which hasn't ever made a mistake.

8. Mistakes losses are an unavoidable part of any trade on any market. The sooner you learn to accept losses in such a way the sooner you will begin to earn. You should not blame yourself others or the market for your losses. Your losses are in no way related to your reasoning abilities. Your task is to calmly analyze your mistakes to not repeat them in future trades. You should not jump joy after winning $800 nor beat your head on the wall after losing $200. The less you let emotion get a hold of you during trading the better your ability to see the true market situation to make the right decision. It is vital to develop a cold-hearted lack of emotion to treat winnings losses as just numbers - not money. Underst that traders don't learn their winnings - they learn their losses. When every loss is perceived as one step towards your next winning trade - you are on the right track.

9. The trader's greatest enemy is not the market putting the blame on which is the same as blaming nature. The trader's greatest enemy - greed impatience lack of control over emotions insecurity in elf a self-centered nature of the trader. You must never open a position simply because you get bored want to do something because you haven't opened a position in a while. There is no norm as to how many positions you should open in a given period of time. Even if you only open one position on 2-3 days but that trade earns you $600-800 - you are on the right track.

10. Keep a diary where you will describe the conditions that led you to make the trading decisions that you did. Write about the market events which influenced your decisions to open or close a position. After every trade analyze it write down the result in your diary. If you made a profit it is important that you underst remember your flow of thinking which led you to the right decision - market events happen often new news may replace old news so you will eventually forget what happened unless you keep track of it yourself. It is even more important to underst why you lost. There are really not that many mistakes that amateur traders commit if you can underst them all you can learn not to repeat them.

11. Reading the opinions of others base your trading decisions on your own analysis of the market your feel for the market which you will eventually acquire. If your prediction matches someone else's good. If not that’s not a problem either. However if upon seeing such a disparity you start doubting your analysis it is best not to make the trade on your real account - only on demo. If you are confident in your decision go ahead do it - one of the predictions will be correct. If your prediction is not the correct one find the fault in your analysis.

12. Always follow the ancient universal rule of the market: cut your losses as soon as possible hold your winning positions open as long as possible. There is more to add: never under any circumstances allow loss to occur in a position which has been making profit. It is better to close it all together without profit if the market suddenly turned in the opposite direction rather than allowing a profit to turn into loss. That would be just stupid.

13. If you suffer a loss don't try to immediately open a new position to "get revenge" on the market - you are only making your situation worse. Only if you see that the direction you have chosen for that position was totally incorrect then it would make sense to quickly close that losing position immediately open a new position in the opposite direction. Don't play guessing games with the market. It is better to lose opportunities than to lose money.

14. You can try to win $1000 in the paid demo competition but you should only attempt this after developing a working individual trading technique which has been consistently bringing you profit on the demo account. Learning to trade in the paid competition is pointless. In your attempt to win more money than everyone else you will cross all limits of risk even if you win you will not be able to trade so confidently with your real money. Such a risky technique will only bring losses on the real account you will not have a cautious safe technique available.

15. Try to think of your demo account as your real account. The sooner you are able to convince yourself that the demo is trading the same real money that you would trade on your real account the sooner you will begin to develop the proper technique of trading which you will eventually use on your real account. You must act the same way when demo trading as you will when trading for real because the technique you develop determines your success in trading.

16. No one knows better than you how much money you should put on your real account later on. In order to trade in the demo it is recommended to lose money until your demo balance reaches the sum you plan to use on your real account. This is a unique opportunity to develop your necessary technique in the conditions of your real account.

17. Try to begin trading at the same time of day each time - the behaviors of the currencies at different times of the day differ by concentrating on a certain time of day to trade you will be able to underst the characteristic behaviors of currencies at this time. Begin your day by researching events which occurred on the market while you were away trading. For this purpose our site has a great feature which will help: "Market News". After getting familiar with the market events look at the graphs for the movement of the currencies starting "tick" charts ending with daily select a tactic which you will use for this particular day.

18. Concentrate on 1-2 currency ps not more. Research their behavior thoroughly. Do not trade different currency ps but observe analyze the behavior of all currencies - they are all dependent on each other. Underst that cross rates have the greatest influence over the behavior of the currency ps including the dollar.

Good luck!

12-11-2003, 07:26	#1
peteuk level 3 Join Date: Mar 2003 Posts: 581 Downloads: 0 Uploads: 0 Rep Power: 0	Advice for Novice Traders courtesy of fx-pro.com I came across this article thought it was worth posting here.... Please note: I have no connection with fx-pro therefore cannot vouch for their reliability as a broker -------------------------------------------------------------------------------- Advice for Novice Traders 1. In order to become a successful trader you must have sufficient risk capital the loss of which (or parts of) will not completely destroy your morale - you must be able to hle this ordeal calmly this should not effect your lifestyle in any way. Your mind should be on the market not on your finances. You must concentrate on the task of trading must remain calm in order to make the proper trading decisions. You should never use the last remains of your finances for trading - the responsibility the pressure would be too great your mind would stray towards your finances not towards the market situation thus greatly increasing the possibility of mistakes. 2. Don't rush to open a real account after only a few days of practice. Practice for as much time as necessary for you to feel confident on your own. Do not compare yourself to other traders - just because it took them a certain amount of time doesn't mean you don't need more. Your primary goal in this practice is to develop an individual trading style or technique such that at the very least your next week's trade earnings are not less than this one's your monthly earnings should increase every following month. Only after achieving this result should you open a real account. 3. When the amount of winning trades surpasses the amount of losing trades your account balance is increasing you have achieved a positive result in trading. However if you have 5 losing trades for $2000 total 1 winning trade for $3000 that is nothing to brag about since you probably made it through only by luck or by the fact that you took an insane risk to use the imum number of lots for your trade. You should never depend on luck . Not on the market - eventually your luck will come to an end. 4. Its not enough to achieve the above results on your demo account. It is equally as important to underst why it happened to develop your profit-making individual trading style. Intuition is very important but basing your trading decisions solely on intuition is unacceptable. 5. Set up strict limits for your losing trades so that you don't lose more than you can hle. These limits should be within 3-10% of the total sum of your account depending on its size. If the market starts going in the wrong direction don't try to think of excuses why you shouldn't close that position - as soon as the losses reach your set limit immediately close the position. Even if the market starts going in the right direction 5 minutes later you have eliminated the risk of it not turning around. You will make such trading rules so that you could trade by them not try to go around them - you would only be hurting yourself if you did. Remember that if your account contains less than $3000 you should not trade using more than one lot. If $3000-$5000 - never more than two lots but only trade two lots only if it is looks safely in the current market situation. If you have $10000 on your account you may trade two lots but never more than three. If you follow these rules you will considerably limit the risk factor. Trading too many lots at once would be dangerous unwise. 6. One of the most deadly mistakes a trader may commit one which shall destroy everything is when the trader (after already losing $200 on a position) begins to think of excuses not to close this position - perhaps the market will suddenly turn around move in a favorable direction? The trader keeps thinking of this doesn't have the heart to close the falling position waiting until this happens. The market does not do any favors for anyone. Eventually the trader will be d to close the position with losses of $1000 or even greater. Not only will the trader lose money they will lose morale too. They will lose confidence in themselves their decisions. The reason for committing this mistake is simple - greed. Losing $200 doesn't hurt your opportunity to not only make up your losses but also make additional profit. Losing $2000-3000 in 1 or 2 trades you completely destroy your opportunity to earn further money! In order to avoid this trouble you must follow a simple rule - never go over the risk limits you set for yourself. Close your positions immediately when your losses reach these limits! 7. The less money your account holds the less money you can lose in a trade the greater that trade's value is to you. Because of this you should avoid opening a real account with $1000 - its just not enough because just like a "spy" you can't afford to make a mistake you don't have the right to make a mistake a mistake is fatal. On any market there is no such trader even the most experienced which hasn't ever made a mistake. 8. Mistakes losses are an unavoidable part of any trade on any market. The sooner you learn to accept losses in such a way the sooner you will begin to earn. You should not blame yourself others or the market for your losses. Your losses are in no way related to your reasoning abilities. Your task is to calmly analyze your mistakes to not repeat them in future trades. You should not jump joy after winning $800 nor beat your head on the wall after losing $200. The less you let emotion get a hold of you during trading the better your ability to see the true market situation to make the right decision. It is vital to develop a cold-hearted lack of emotion to treat winnings losses as just numbers - not money. Underst that traders don't learn their winnings - they learn their losses. When every loss is perceived as one step towards your next winning trade - you are on the right track. 9. The trader's greatest enemy is not the market putting the blame on which is the same as blaming nature. The trader's greatest enemy - greed impatience lack of control over emotions insecurity in elf a self-centered nature of the trader. You must never open a position simply because you get bored want to do something because you haven't opened a position in a while. There is no norm as to how many positions you should open in a given period of time. Even if you only open one position on 2-3 days but that trade earns you $600-800 - you are on the right track. 10. Keep a diary where you will describe the conditions that led you to make the trading decisions that you did. Write about the market events which influenced your decisions to open or close a position. After every trade analyze it write down the result in your diary. If you made a profit it is important that you underst remember your flow of thinking which led you to the right decision - market events happen often new news may replace old news so you will eventually forget what happened unless you keep track of it yourself. It is even more important to underst why you lost. There are really not that many mistakes that amateur traders commit if you can underst them all you can learn not to repeat them. 11. Reading the opinions of others base your trading decisions on your own analysis of the market your feel for the market which you will eventually acquire. If your prediction matches someone else's good. If not that’s not a problem either. However if upon seeing such a disparity you start doubting your analysis it is best not to make the trade on your real account - only on demo. If you are confident in your decision go ahead do it - one of the predictions will be correct. If your prediction is not the correct one find the fault in your analysis. 12. Always follow the ancient universal rule of the market: cut your losses as soon as possible hold your winning positions open as long as possible. There is more to add: never under any circumstances allow loss to occur in a position which has been making profit. It is better to close it all together without profit if the market suddenly turned in the opposite direction rather than allowing a profit to turn into loss. That would be just stupid. 13. If you suffer a loss don't try to immediately open a new position to "get revenge" on the market - you are only making your situation worse. Only if you see that the direction you have chosen for that position was totally incorrect then it would make sense to quickly close that losing position immediately open a new position in the opposite direction. Don't play guessing games with the market. It is better to lose opportunities than to lose money. 14. You can try to win $1000 in the paid demo competition but you should only attempt this after developing a working individual trading technique which has been consistently bringing you profit on the demo account. Learning to trade in the paid competition is pointless. In your attempt to win more money than everyone else you will cross all limits of risk even if you win you will not be able to trade so confidently with your real money. Such a risky technique will only bring losses on the real account you will not have a cautious safe technique available. 15. Try to think of your demo account as your real account. The sooner you are able to convince yourself that the demo is trading the same real money that you would trade on your real account the sooner you will begin to develop the proper technique of trading which you will eventually use on your real account. You must act the same way when demo trading as you will when trading for real because the technique you develop determines your success in trading. 16. No one knows better than you how much money you should put on your real account later on. In order to trade in the demo it is recommended to lose money until your demo balance reaches the sum you plan to use on your real account. This is a unique opportunity to develop your necessary technique in the conditions of your real account. 17. Try to begin trading at the same time of day each time - the behaviors of the currencies at different times of the day differ by concentrating on a certain time of day to trade you will be able to underst the characteristic behaviors of currencies at this time. Begin your day by researching events which occurred on the market while you were away trading. For this purpose our site has a great feature which will help: "Market News". After getting familiar with the market events look at the graphs for the movement of the currencies starting "tick" charts ending with daily select a tactic which you will use for this particular day. 18. Concentrate on 1-2 currency ps not more. Research their behavior thoroughly. Do not trade different currency ps but observe analyze the behavior of all currencies - they are all dependent on each other. Underst that cross rates have the greatest influence over the behavior of the currency ps including the dollar. Good luck!