1. Be realistic
Perhaps the hardest but most important thing for a new trader to do, is to be realistic. I’m sorry, but I have to tell you that you aren’t going to be able to quit your job and go work from a beach with a $2,000 trading account. If any other site or person is telling you something like this, you need to RUN from them because they are scammers and have no clue what they’re talking about.
Can you make a boat load of money trading the markets? Sure, of course. Perhaps no other profession in the world has as much upside potential as trading. But, that comes at a steep cost; it’s not easy, at least not mentally easy.
You are going to encounter all kinds of mental ‘traps’ and self-sabotage mistakes along the way on your trading journey. Being grounded and realistic is what will keep you on the path to trading success. If you start getting dollar signs in your eyes you’re going to over-leverage (risk too much) and over trade your account and lose money instead of make a lot of money. You don’t want that.
2. Don’t trade a lot.
Slow and steady wins the trading race, it’s cliché I know, but it’s so true. Trading with high frequency opens you up to a world of emotional trading mistakes that will destroy your trading account and your self-esteem.
I’ve written many articles on this topic, and I know that for many of you this will unfortunately not register in your mind until it’s too late, but you do not need to trade a lot to make a lot of money. To understand why more clearly, check out this article on high frequency vs. low frequency trading.
3. Focus on the daily chart
You need to learn how to interpret and trade the price action on the daily chart time frame before you do anything else. I’m not going to get into this too deeply here,
4. Don’t put stop losses too close
This one is big, and it takes most traders a while and a lot of lost money to figure it out; you have to place your stop losses at a ‘safe’ distance away from your entry price. If you place them too close you will get stopped out for a loss before the market really had a chance to move in your favour. In other words, your trade idea may have been right, but because you placed your stop loss too close, you got stopped out before the move you were anticipating occurred.
5. Don’t just jump in with no education
It’s always amazing to me how many people want to risk their money in the market without having obtained any training or trading education. Then later, after they’ve lost a bunch of money, they decide to get some education. This is backwards, it’s like trying to fly an airplane without going to flight school, then you crash the plane and almost die, then after all that you decide to go to flight school…many traders do this exact same thing with their trading accounts, don’t be one of them!