You’re truly the only one who can prove people wrong nobody else is going to do it for you. Stop letting other people diminish your value. Put in the work, prove them wrong and make them look like the fool!
lesson number three. ( Maintaining Discipline )
One of the great things about trading the markets is that every day has the potential to bring something new.
It's what makes trading exciting. But it also means that a good trader needs to maintain discipline and focus.
It's all too easy to get engrossed in a situation, or a trade, while losing sight of the bigger picture. Always keep the risks in the forefront of your mind, no matter how confident you feel in your idea.So if you want to become a successful trader, look at the markets as a business. By all means hope for the best, but always prepare for the worst. Be pragmatic, manage your own expectations and plan your strategy - always following our rules.
And that brings us to rule 5:
Rule 5: obey all of the rules - always
Our final rule might not sound very thrilling in itself, but it will let you focus on what really is more exciting: staying on top of the markets and making healthy, sustainable profits.
To recap, our five rules are:
1. Plan how you'll exit a trade before you enter it
2. Set a stop when you open a position, so you have protection right from the outset
3. Look for positive risk vs reward ratios, because nobody has a crystal ball and you can't win every trade
4. Never risk more than 5% of your equity on any single trade idea
5. Obey all of the rules - always
* Expect the unexpected in the markets
* Keep risk in the forefront of your mind
* Plan and prepare
* Be disciplined and focused
* Follow the five rules at all times
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lesson number three. ( controlling risks )
Following the first three rules will begin to help you manage risk in your trading activities. But these steps alone won't protect you from the risk that a single bad trade could wipe out your trading account if you risk too much on any one idea.
So it's important to consider the amount of risk you're accepting on each and every trade.
Rule 4: control your risk amount per trade
Suppose you open a trade on EUR/USD, setting a protective stop-loss order at 100 pips and a limit 200 pips away. Could you still blow up your account?
Yes, absolutely. If a move of 100 pips equates to 50% or more of your trading account, just that one trade could erase a significant portion of your equity if things go wrong.
You can avoid this situation by controlling the risk amount on each individual trade setup.
Many professional traders will keep their risk amount per individual trade idea to less than 1% of their account equity. That way, if any given trade idea doesn't work out, the most they stand to lose from it will still leave them with 99% or more of their account equity intact.
* A single bad trade could wipe out your capital if you accept excessive risk
* Control the amount of risk you take on each trade
* Risk no more than 1-5% of your trading capital on any single idea
lesson number two. ( balancing risks and rewords)
As we know, all trading involves the risk of loss. So, in every trade, the risk to your capital needs to be worthwhile for you in relation to the potential profit.
Rule 3: calculate your risk vs reward ratio
You can use the risk vs reward ratio to quantify the worth of a trade:
Your risk vs reward ratio is the amount of risk you're taking on in a trade, compared to the amount of potential reward.
This is an area where lots of new traders falter. They begin with the belief that they have to 'beat' the market - or 'out-predict' other traders - in order to become profitable.
There's just one problem with that: it's impossible to predict the future, no matter how much knowledge and experience you have.
So instead of fixating on winning more, professional traders will usually focus heavily on their risk, ensuring that every pound, dollar, etc put on the table as risk capital is worthwhile in terms of the potential return.
* The risk to your capital should be outweighed by the potential profit on a trade
* Your goal is to gain more if you're right than you might lose if you're wrong
* Using a 1:2 risk vs reward ratio means you can be profitable even if you're only right 40% of the time
* Set your limit order at twice the distance of your stop to achieve a 1:2 ratio
To be a sufficient trader you need to understand trading rules which i will post it in four lessons.
Lets start lesson number one. ( planning your exit)
Rule 1: always have an exit strategy
You need an exit plan - a strategy for managing the risk of the position, so that one bad trade won't wipe out a significant chunk of your trading capital. But simply telling yourself where you want to get out may not be enough.
Consider the scenario: you head to bed for the night with a position going well, but by the time you wake up in the morning the market has taken a turn against you.
Or perhaps you're watching a position while travelling on the train. You enter an area with no mobile or wifi service, and by the time you get back online the market has moved past your planned exit level.So once you’ve decided where you’ll close the trade, you need an automated mechanism to protect you when you’re not in control. And that’s our second rule.
Rule 2: set a stop
Setting a stop reinforces your exit strategy. The resting order will close your position if the market hits the level you specify, even if you're not logged in to your platform at the time.
It also removes the need for you to make a difficult decision under pressure.
It's easy to disregard the emotional aspects of trading. But, especially when you're new to the markets and still learning, the rollercoaster of feelings created by losing a trade can have a substantial impact.
* Every trader needs to be prepared to suffer some losses
* Always plan where you'll exit a trade if it doesn't go well
* Set a stop to close the position automatically for you
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