- Don't take a loss in the market personally.
The market doesn't know who you are. Losing is part of the game. The ability to move from trade to trade without using hindsight and 'what-ifs' is a key step in the evolution of a trader. Accept your losses, and move to the next trade with the same objectivity you used on the previous trade.
- Determine the trend in the market and use that for the premise of your entry.
If the market is in an uptrend you should be more aggressive to the buy side and vice versa, picking tops and bottoms, gives you an occasional "home run" trade, but fading the trend will whittle away at your account.
- Record your trades in a trade log or journal.
Even if you are a seasoned vet, it is helpful to review the 'mindset' of each trade and then have a written journal that you can refer back too.
- Don't risk too much of your account value on one single trade.
Trading is a marathon, not a sprint. If you risk too much of your capital on one trade and lose, you will have taken yourself out of the game and there is no way to profit if you are not playing.
- Never add on to a losing trade, this is what I call 'cannonballing' and it always seems to work against you.
If it is not part of your original trading plan, adding on to a loser will make you more emotional, and more often than not, you will lose a lot more than you originally intended.
- Never risk more on a trade than you reward yourself with if you are right.
This is just simple math. If you always risk more than you try to make, you had better be right most of the time!
- If you can't answer why you are in a trade, then you probably shouldn't be in that trade.
- Don't loosen up your stops when you are losing money.
If the trade is already against you, the chances are it will go against you further, and stop you out anyway. Trade objectively; accept the loss and move on to your next trade. Take the emotion out of trading by expecting you will have some losing trades, everyone does.
- Always have a plan.
Each trade you make should clearly define an in and an out. Train yourself to get out when you said you were going to. This is called sticking to the game plan. Getting into a trade is easy, getting out is the hard part, that is why you need to stick to your game plan.
- Know your limitations.
Whether it is monetary or emotional you should never extend yourself while trading. When you are out of your comfort zone, emotion is bound to take over and irrational trading decisions are usually the outcome of emotional decisions. Find a market that suits your comfort and trade it within your limits!
- Check your ego at the door!
How many times in the past have you made a great trade and walked away with your head held high, and your chest puffed out thinking 'I am the greatest trader in the world?', only to have the market remind you who is in charge.This can have a huge effect on your psyche.Try to approach each trade the same, forget about each previous trade when entering a new one, and have a somewhat robotic programmed mindset as you enter each new trade. Expect to lose money on each trade, and know that you are comfortable with the amount you could lose, and this should help you get over the super-trader ego after a nice winning trade!
- Do your homework.
You remember hearing it as a child and saying it as a parent, and it applies to trading. Analyze the technicals, the fundamentals, historicals, whatever you need to review to have the market "make sense" to you. And use this type of homework to develop good trading habits.
- Homework continued.
If you feel you are putting in a lot of time and not finding success in the markets, there is a possibility you are studying the wrong things. It is very important to trade a market that you are comfortable with and also find a system within that market that suits your personality. Reading a Physics text book to prepare for a History exam isn't going to get you anywhere, so apply this same idea to the markets. It took me about 5 years to find and develop a system that I am comfortable with and that suits my personality, (for now), so do your homework!
- Risk management is king.
A solid risk management system allows you to be in the market for a long time. The market is going to be there the next day, so make sure you are by managing your losers, keep them small, and when you take profits, make sure they are bigger than the losses.This is the single most important factor in successful trading, and the hardest to apply to trading as well.
- Set a short term and long term trading goal and establish a reward for yourself if these goals are met.
Do not reward yourself until the goals are met. Reaching your goal will make you feel better about your trading, and make the reward that much sweeter. And your account will probably be looking better, unless your goal was to lose money?!
- The market isn't the only thing that trends.
If you notice a trend in your trading, a winning streak or losing streak, you should take note of such streaks. When you notice such streaks you should be willing to make the appropriate adjustments. Without changing your discipline and risk management style, when you are in a rut you should cut back on your contract size, and when you are on a roll, you should up your contract size. It is extremely important not to change your risk management when upping your contract size.It is natural to become 'nervous' because your risk is larger, but you should have confidence in your trading to overcome your emotion.
- Enjoy your time off!
Take some time away from the markets and don't think about trading. Spend some time with your family, take in a movie, do what you like to do when away from the markets, the market will always be there, and we need to relax sometime!
- After a 'break' in trading, ease back into your trading plan.
As is the case with the long holiday weekend, take some time to review your game plan before jumping back into the markets. This will get you back into the swing of things, rather than taking quick avoidable losses, because you didn't prepare properly after the break. Don't take your trades for granted! Prepare properly and get back into the swing at a steady pace!
- Expect the worse, hope for the best.
Imagine every trade that you get into will be a loss. This gives you great perspective going into a trade. If you assume every trade is a loss, you know going in that you are comfortable risking the pre-determined $ amount on that trade.If the trade turns out to be profitable...great! Then move on to your next trade, and imagine it will turn out to not be profitable. This will help you understand the role of risk management from a 'losing' perspective!
- Don't overtrade.
Set a daily loss limit, and profit objective. Once you have reached either the profit or loss limit for the day walk away. It is a very hard habit to develop, but it is very important to develop. If you find yourself trying to trade out of losses, you will find that the losses compound and emotion takes over. Also it is very frustrating to 'give back' profits once you are up what you set out to make. Do yourself a favor and develop solid trading habits by establishing daily limits.
- Take some time to learn from others.
Read a trading book, join a trading forum, find a chat room with traders, this will give you a grasp on different aspects of trading. Many times in trading, situations occur that make you fell angry or confused. You feel singled out, that the market is picking on you. However, you will find by sharing your experiences with others that others have gone through the same experiences as you. Learn how to adapt by learning from others.
- Always expect the unexpected.
Commodity markets are volatile and unpredictable, so expecting the unexpected will keep you on your toes. Using stops to prevent large losses in volatile markets is the best way to protect yourself in a large 'unexpected' move. If you prepare yourself for the unexpected, you won't be scratching your head and looking at empty pockets when it happens.
- Don't be afraid to say the magic words "I am wrong!"
Being wrong is something you had better get used to in trading, the longer you stay in a loser because you think you are right, the longer you will watch your account diminish. As your account gets smaller and smaller eventually one of two things happen: 1. you run out of money 2. your margin department gets you out of the trade. Don't let this happen to you! I see it more than you would believe, it's happened to me, so please just be wrong small, and move on!
- Knowing why you have a winning trade is more important than just having a winning trade.
If you find yourself trading without knowing why you are in a trade, your luck will run out, and when the smoke clears, you will be wondering how you lost money. Know why you are in a trade, so you don't have to ask yourself "How did that happen" after a trade!
- Stay informed.
Keep track of the fundamental reports that affect the market you are trading. If you don't keep track of reports, you may find that you are surprised the market turned sharply and you will find yourself asking "What the heck just happened "Knowing when the news comes out will allow you to make the appropriate adjustments to maximize profits and minimize losses, by adjusting stops and profit objectives appropriately. Get an economic calendar or find a website that posts the fundamental news.
- Trades that are poorly planned that result in a loss weigh heavy on emotion and confidence.
The opposite is true as well. Trades that are poorly planned and make money, balloon confidence and create a false sense of security. The theme here is managing and planning your trades takes the surprises out of trading and directly gives you the ability to control your emotions while trading. Avoid emotional swings and over-confidence by properly planning your trades.
- If you are new to trading find a mentor.
When you learned how to read you had a teacher, when you learned how to play basketball you had a coach. When you are learning how to trade you should find someone you can trust, and learn from their experiences. It does not have to be a broker, or a market 'guru', it can be anyone that has experience trading. Don't make the mistake of jumping into the markets without a little guidance; the only thing you have to lose is your hard earned money!
- Maintain your discipline when adapting to market conditions.
If you find that your trading system runs through a drawdown period, and you change your trading system to adapt to what the market is doing, make sure you do not change your discipline. Changing a strategy should not include changing your risk management. Program yourself to make well planned trades that involve a comfortable level of risk, this should help you in the adaptation process.
- Not every market suits a trader's personality or risk tolerance.
Find a market that you are comfortable with. For accounts with smaller margins capabilities and risk tolerance it is wise to find a market that doesn't make drastic swings and has a lower tick value. Trading a market that you are uncomfortable with will cause you to second guess your trades, as well as keep you out of markets that you may find suitable.
- The easiest thing to do in trading is opening a position.
It is 10 times harder to get out. That is why you should have a strict definition of where you are going to take losses and where you are going to take profits before you enter the trade. Defining your trade takes emotion out of your trading process, and will allow you to program yourself to accept losses and move on.You will get stopped out, you will lose money, but having the market stop you out at a pre-determined exit will always be a factor. Let the market beat you up from time to time, so it is not you beating yourself up. A trader will most likely be harder on themselves then the market will be.
- Compare trading to playing baseball, specifically hitting a baseball.
The solid hitters, overtime, go to the plate to make contact, and reach base by hitting a single. Every now and then they make solid contact and hit a homerun. My approach to trading is similar, every trade I take I am looking to make "contact", taking a little profit here and there, to have a consistent average. I am not worried about hitting the "home run", because those happen by being consistent, not by forcing trades to get a big winner. When you swing for the fences, you will strike out more than you will get the huge winning trade. In summary, trade small and consistent and focus on "hitting singles".
- Out of all the athletes in the world the ones that win the gold are the select few who are dedicated to their sport.
They put in countless hours of hard work and dedication constantly working on tweaking their techniques and enhancing their style. To 'get the gold' in trading you have to have a similar mindset. Work on tweaking your style, dedicate yourself to become a 'student' of the markets, and put in the time to achieve success, and you will find that the harder you work the more success you will find.
- Invest some time into learning more about trading.
If you put time into learning more about the fundamental, technical and psychological aspects of trading you will only benefit. Trading futures is a very hard business to succeed in. The bottom line is affected by how much time and research you put into understanding what you are doing. Would you pay money to enter a golf tournament without taking the time to learn the game? Would you enter a cooking contest without finding out more about the competition? You should strive to set aside 15-30 minutes a day to learn because it is your money on the line.
Disclaimer: The above listed 33 trading tips are for your informational benefits only and do not nessacarilly represent the opinion of MyFuturesOnline. The methods listed above that may have worked in the past many not necessarily work in the future.