Stock trading may not be suitable for everyone as it requires a specific personality type to handle the pressure and maintain the discipline needed for success. Newbies often experience a high burnout rate, but those who persevere can achieve an unparalleled profit ceiling.
If you're considering a career in stock trading or already on your journey and looking to improve, pay close attention to the three tips in this article. We've kept it simple and avoided overwhelming you with a long "Best Practices" list.
Why only three tips? As a trader, you'll appreciate that the number three is the minimum required to establish a pattern. When analyzing a chart pattern, two points don't provide enough information. It's the third point that confirms the pattern.
Our goal was to avoid overwhelming you with a lengthy list of "how to" suggestions that could hinder your progress. Your job is straightforward: buy low and sell high. Anything else is just noise. Follow these tips, and you'll succeed.
Tip #1: Self-Reflection
In 2017, Forbes Magazine published an article stating that 90% of day traders fail to turn a profit. This statistic highlights the number of inexperienced traders in the market. Unlike gambling, where the odds are stacked against you, successful stock trading requires proper execution and strategy.
Self-reflection is a crucial skill for traders to develop. It involves identifying and correcting mistakes, bad habits, and patterns that result in losses. Repeating the same unsuccessful actions and expecting different outcomes is the definition of insanity. Therefore, if a plan isn't working, it needs to be modified or replaced.
However, having a plan is only the first step. Novice traders often react to market changes instead of anticipating them. This reactive approach is counterproductive and can lead to impulsive decision-making. All-in trades to compensate for recent losses are a cautionary tale in the trading world.
A self-reflective trader takes time to evaluate their trading plan continually. However, assessing risk in the middle of the trading day indicates fear and not intelligence. Before the trading day begins, it's best to determine the amount to invest in each trade and execute the plan accordingly. Evaluation should occur after executing the plan.
Mistakes are often more apparent in hindsight. However, we are not referring to losses, as they can occur for various reasons. Sometimes, uptrends and downtrends do not happen as predicted by chart patterns, and that is not within your control. However, ignoring the patterns is your responsibility.
Another potential issue to keep in mind is your behavior. To be a successful day trader, it is necessary to be present and committed. Taking excessive breaks or deviating from your plan are behavioral errors. You can identify these mistakes by practicing self-reflection.
It could be that you are better at shorting the market than going long based on your risk to return ratio. Once you recognize this about yourself through self-reflection, it's crucial to stick to what you know and not try to be something you are not.
Finally, it's essential to reflect on unique patterns that lead to losses. Like baseball players who struggle with certain pitches, traders can have trouble with specific patterns. If you consistently face losses due to a pattern, avoid trading based on that pattern.
In 12-step recovery programs, this exercise is known as a "personal inventory." Create a list of all the aspects of trading you should pay attention to and use it daily to reflect on your trading activities. It's a crucial exercise that will help you become a better trader.
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Tip #2: Full Concentration
This will help you concentrate exclusively on your trading activities. Check our Market Overview
Tip #3: Strict Risk Management
If you're new to the world of trading, it's important to understand that the definition of risk is vastly different from what you may be accustomed to in other contexts. While in the non-trading world, risk is often viewed as a long-term concept, such as with 401(k) or Roth IRA investments, in the trading world, risk is evaluated on a trade-by-trade basis and is a more scientific concept.
The most successful traders know exactly how much they are willing to risk per trade and develop a plan for making a certain number of trades per day. This process is known as risk management, and it is critical to long-term success in trading.
Developing effective risk management strategies takes time and practice, so we strongly recommend exploring and refining your techniques using a trading simulator before using real money. One of the best tools available for this purpose is Tickeron's Paper Trade application. Take the time to master risk management before putting your hard-earned money at risk.
It's important to maintain a consistent risk management strategy even if you incur heavy losses in the early part of a trading session. It's not uncommon for traders to experience losses initially and then recover as the day progresses. To increase your chances of success, cultivate good study habits and maintain consistency between sessions.
Keep your emotions in check when trading, whether you're on the trading floor or online. If you want to trade based on "gut feelings," consider setting up a Robinhood account, where many inexperienced traders tend to congregate.
This recommendation aligns with the previous two we've presented: 1) engage in self-reflection, and 2) fully concentrate when trading. Additionally, adhere to a strict risk management strategy. By following these guidelines, you'll be better positioned to succeed in your profession.
The main idea behind technical analysis is the ability to find recurring price patterns and trends and use them to predict the direction of future market trends. We started with the creation of AI-based Engines (Pattern Search Engine, Real-Time Patterns, Trend Prediction Engine) that allow us to effectively analyze market trends. We then have explored almost all existing methods (price patterns, trend indicators, oscillators, and many others) using neural networks and deep historical backtests. As a result, it was possible to form a pool of trading algorithms that together allow our AI Robots to effectively determine the key points of change in market trends.