Hi everyone. I have been trading for quite some time and have picked up a lot of trading skills over the years. In this brief article, I hope to save some time by sharing five trading tips that will instantly improve your trading.
Trading tips number 1
Always have a trading plan. Without knowing the business plan, you would never invest money into a new venture. Well, a trading plan is your business plan. You’re the most sane and clear-headed
before you put your trade on. So that is a great time to think about why you’re placing the trade.
Ask yourself where you plan to take profits and when you plan a bail if the trade goes south. Likely, you’ve already pre-planned your stops and targets, so stick to them. Making money and keeping that money are entirely different skill sets, both of which you need to master. Protecting your capital, especially during turbulent times, is just as important as making money.
Trading tips number 2
Only trade in the direction of the trend. This is probably the most controversial trading advice because many love picking tops and bottoms. Of course, you can do that, but how do you ensure the market starts at the bottom before you buy and sell at the top? Don’t arbitrarily pick a top or bottom because you think the instrument is overbought, oversold or simply because you feel like it. Always look for the justification for your decisions.
You’ll make more money trading trends than fighting trends. Trend trades will give you the least amount of anxiety. The majority of successful traders are trend traders. Some realize it quickly, and some take some time to come around, and that’s okay.
Trading tips number 3
Don’t add to losers. There’s a saying by legendary trader Paul Tudor Jones, “only losers add to losers”. Unless averaging down was a part of your original trading plan, adding to losers is usually a terrible idea. Why? Because there’s a reasonable chance that the momentum the direction of the trend is shifting against you. Hoping you can bail your trade out of the loss by averaging down is often a losing proposition. If it’s going against you, stick with your stop or get out and reassess.
Trading tips number 4
Always use a stop. The current market environment gives us countless examples of why you should always use a stop. We’ve seen currencies hit multi-decade lows recently, and if you didn’t use a stop, you probably got a margin call. It doesn’t pay to keep a losing trade; it doesn’t always turn around. It can keep falling for a very, very long time until pretty much your account blows up.
We’ve also seen wild swings on an intraday basis with the Bank of Japan and Bank of England’s intervention. Without a stop, you could be facing crippling losses.
Trading tips number 5
One of the most essential tips is don’t ever revenge trade. I know it can be tempting, but when you lose, move on. Doubling down, hoping to make it all back, is trading emotionally and irrationally. When that happens, you’re also probably making a lot of mistakes and trading poorly.
It is much better to step back, turn off your computer and come back at a later time. Ideally, the next training session and start fresh, focusing only on your strategy setups. I start fresh almost every trading session regardless of whether I’ve had winners or losers.