The best way to approach trading in the financial market is to approach the way you would approach launching your own business. Trading in the financial market is very similar to running a business. Your main aim is to earn revenue, but more importantly, it is to ensure that you gain revenue that exceeds the costs. While trading, you will get the revenue after winning the trade. The cost is here comprises of the losses incurred in market speculation. The all-important net profit is derived from the difference between the revenues and costs.
Here are key things to keep in mind when you start trading
Trade with the prevailing trend
Always consider the path that has the least resistance and go with the flow of the current market
Come up with a detailed strategy for entering and exiting trades
This strategy should have defined parameters that you can use to enter and exist trade
Be on the lookout of your downside risk and put in place measures to control that risk
Be disciplined and ensure that you have the ability to preserve your trading account. This will help in preserving the funds so that you can live to trade another day.
Trade because you have a reason to, dot follow your emotions
If you want to succeed in trading in the financial market, do not use human emotions (greed, fear, and excitement ) while trading.
Do not trade right around scheduled news events
In most cases, Forex trading becomes more like a gambling around the time of news events, where the prices are less stable and move drastically within a short period. In such circumstances, it excludes an average trade from participating in these moves.
Apart from these key things, for you to become a successful long-term trader, you must have the ability to have good habits from the beginning. These habits will help you in accomplishing the following goals
Achieve positive net profit over any given period
Increase positive net profit as the business grows
How will you achieve these goals?
It is crucial to know how to quantify your exit strategy before entering in any trade. This will be very useful especially in covering your downside risk.
This means before entering any position; it is crucial to know where the point of pain resides. This is the position where the trade must cut in for it to preserve the financial integrity and health of your trading account. When you allow losing trade to pass this point is a receipt for failure.
Position sizing is also another great habit exhibited by successful traders. When entering any trade, predetermine a proper position size in accordance to the size of your trading account. It goes without saying, a trading account that has 10,000USD requires a different position size than a 1,000,000 USD trading account.
Another important habit to have is to avoid rushing into a trade. Weigh the trading opportunities carefully. This suggests that you should have a detailed trading plan and have rational reasons for getting into and out of market positions.
The habits we have listed here will help you to build a prudent mindset that helps you to become a successful trader. These habits are very important especially if you are beginning to trade the market. However, developing other habits such as trading with the prevailing trends as well as running profits while cutting losses will help you to maximize your revenues.