Some common problems that new traders face when they first start trading on the market daily are: (1) trading without a strategy, (2) underestimating the amount of time and effort they need to put in to be successful, and (3) letting the wins and loses of trading influence their trading decisions.
A few methods beginners could use to not fall victim to these mistakes is understanding how to properly learn new trading strategies and how to manage their wins and losses effectively to minimize risk and maximize profits. With a few helpful tricks and tips, anyone starting in the industry can mature into a profitable, smart trader.
Developing new strategies
As beginning traders, we are always looking to develop new trading strategies as well as perfect our current ones. When new to the market the best advice I could give someone just starting their investment careers is to know their own personal limits.
As traders, we want to avoid using techniques that are above our skill level and make sure that we have the skill set necessary to trade with whatever strategy we are pursuing. Furthermore, when learning new strategies and maturing as traders we want to give ourselves a trial run at them before jumping into the deep end.
A great method for developing new trade setups is starting them on a small scale to ensure you don’t lose big simply because you didn’t have enough knowledge on the strategy, and could have succeeded if you dedicated a bit more time to the learning process. After this learning period, you then can increase your position in a trade once you get more comfortable with your new strategies.
How to approach consecutive wins and loses in trading
Another common problem that many new traders struggle with is trade and risk management. As traders, we are all going to have red days and can’t win all the time. Typically traders new to the market battle with becoming profitable, and even some may have a hard time becoming breakeven traders. So, how can we as traders adjust our positions when hit with a losing streak to minimize our risk and monetary losses.
I believe this applies to all traders, and not just those new to the market, but if you have hit a slump and are struggling with multiple red days I suggest that you cut your lockdown in half, and progressively repeat this process until you go green again. Then, increase your lockout by the same half steps day by day. By following this process you still allow yourself to trade while minimizing your losses, and you prevent the added risk of wanting to swing for the fences with a volatile trade in an attempt to earn your lost money back fast.
As trades, we must remember that the market isn’t going anywhere and there will always be time to earn our lost money back. When battling consecutive losses it is crucial for us as traders to reestablish confidence in our decisions, and decreasing our lockout is an amazing technique to minimize personal risk while working to become profitable once again.
In addition to learning to manage a losing streak, it is important for new traders to know how to handle a win streak to avoid letting big financial wins cause you to lose big in the heat of the moment and excitement of earning big rewards. An awesome strategy to employ into your trading when you are having continuous green days is to take the average daily gain from your win streak and make this your new lockout.
By using this strategy you ensure that at most you can only lose one days worth of gains in a trading day protecting your PnL. Additionally, this plan of action helps to remind new traders to not fall into the get-rich-quick trap of the market and make gradual progress in their earnings to losses ratio. The market rewards discipline and patience, and remembering these facts will help you as a beginning trader make major steps in your new career.
Getting into prop trading
Lasty, tons of new traders have questions about proprietary trading, as it is a field many would like to get into once they hone their skills and gain more experience within the market. I believe that proprietary trading is an amazing field to get involved in and many individuals become very profitable working for large trading firms. Some of the benefits I see to proprietary trading are that you are able to trade with more capital since you aren’t just trading with your money, and there is a greater sense of accountability and support involved.
Through firm set lockouts you are held to the firm’s standards and avoid trading on tilt, since you must ask your managerial figure for permission to continue trading if you hit your lockout value. Furthermore, at a proprietary trading firm you have people around you trading and struggling with similar battles as you are, and they are able to provide a great deal of emotional and professional support to anyone on the trading team. Additionally, I don’t believe there are many disadvantages to proprietary trading other than a firm’s trading style may be different from your own, however I think this comes down to finding a firm that is right for you.
The best advice I could give a new trader whose goal it to work for a proprietary firm is to gain as much experience and do as much learning you can on your own through your own trading, listening to podcast, joining chat rooms, etc. to ensure that you are ready for the big league once you join a firm.
Important factors to remember when learning the market
Trading is a difficult profession to get into, but also an extremely rewarding one. It is important for traders new to the market to remember that the industry rewards those who work hard and take the necessary time needed to perfect their skills and set up proper trade techniques. The best way to learn new trading techniques is to start practicing them on a small scale and minimize your risk of losing big due to uncertainty and unfamiliarity with a technique. Furthermore, traders can easily open themselves up to a lot of risk when dealing with a losing or winning streak in their trading.
Cutting your lockout in half if you are having consecutive red days, and setting your lockout to your daily average profits from a win streak, can help to reduce risk when faced with these two scenarios.
When first starting out as traders many of us can find ourselves struggling to develop new trade techniques and manage our trades and risk. Some helpful tricks to learn new strategies as an emerging trader is to start on a small scale and make sure that you have the right skill set for the strategy you are pursuing.
If you find that you don’t have the skills, take the time to research and learn on your own so that you are prepared to enter the market with your new strategy. Additionally, when you start as a day trader you may find yourself struggling to hit a green day, entering a slump of red days.
If this is the case, I recommend you reduce your lockout in half to minimize your losses and help regain your confidence as a trader. Lastly, always remember to be patient with yourself and disciplined in your trades, as these are some of the major ingredients to becoming a profitable trader.