How To Trade Effectively And Not To Lose Everything

Tuesday, 06 November - 10:36

To win, you must survive first.

Surprisingly, this part of the financial instruments trading is said the least. An experienced trader is a someone who has already learned how to manage capital, not just assume the outcome of the event by investing money.

For all of you, my friends, I suggest to read the article and to take for yourself some techniques that will allow you to stay afloat until you start earning.

To begin a transformation to a successful trader, you need to start with a simple set of rules for yourself, which you need to remember every time before you make a deal:

1. First of all, the winner is the one who survived.

In more details, this statement looks like a formula - “to preserve capital is already a victory”. Therefore, before making a deal you need to think about the following:

a) Will there be enough capital left after the transaction in order to remain a “winner” in the end?

b) “Should I open a deal now or wait a bit?”

2. The division of capital is a principle that shows the movement of money and allows you to invest in different assets in order to reduce risk.

Everything is straightforward - it is better to invest in different assets to have less risk per transaction.

3. Discipline is above all.

Discipline is expressed in sticking to a capital management plan and opening deals for the amount that does not harm your account until you are sure about the deal.

4. More doesn’t mean better.

You can come and open 60 one-second intervals transactions in a minute, but will it be effective? It is better to focus on clear market signals or strategies, which allow you to limit the risk and increase the chance of winning.

Let's see how to apply this to trading with a specific example.

Before start trading we need to define a plan. If we lose about 30% of the capital, then we should take a rest and think about why it happened.

Of course, you can put all 30% in one transaction but to have more stability I advise you to divide the amount into 12 transactions.

Such a division will allow us not to risk in one transaction more than 2.5% of the capital while having a solid chance of earning in the long term.

It is the way professional traders do:

They have a trading plan;

The amount of loss and investment is always determined for each transaction.

It allows them to survive and earn.

After that, we determine that we have a lot of tools for investing capital, which means we choose the 2-3 most convenient markets for ourselves, which we are watching. This approach will allow:

More attractive deals

To distribute capital in different baskets and to represent the market broader.

3-4 deals on an asset will cause you to keep in constant focus and evaluate each opportunity carefully.

After we have chosen and determined everything, we will start implementing the plan and here comes the most important and difficult moment - discipline. It means that you should always follow the plan.

If your limit is 30%, then you may not make “one more deal”. Better to rest for an hour and a half before you start trading again or think over your mistakes during this time. You can even write them out and always keep in front of you.

It is important to treat trade as an intellectual sport such as chess or poker. This will help to grow as a trader and achieve success, as well as soberly assess your actions and analyze mistakes.

Thank you for being with me, I hope the next attempt will bring you success!

Trade