Having a successful practice trading session does not ensure that you will have a successful real-money trading session later on. Emotions enter the picture at this point. Successful practice trading, on the other hand, may instill trust in a trader’s trading strategy if the system generates favorable outcomes in a practice setting. A method is less vital than developing the necessary skills to execute transactions without second-guessing or questioning one’s own judgment in making them. The most important thing is to have confidence.
The likelihood of a transaction making money cannot be predicted. It is the trader’s ability and strategy of winning and losing that determines his or her odds of success or failure. The concept of winning without losing is a misnomer since it does not exist. Professional traders are aware that the odds are in their favor before they initiate a transaction; otherwise, they would not be there at the trading table. An investor who lets their gains run and cuts their losses short will lose some battles, but they will win the war in the long run. It is the reverse that is done by most traders and investors that results in their inability to consistently earn money.
1. Preparation for the International Trade Environment
Whatever trading method and software you choose, make sure to identify major and minor support and resistance levels on the charts, set alerts for entry and exit signals, and make sure that all signals can be readily seen or recognized with a clear visual or audible indication before you begin trading.
2. Configure Your Exit Procedures
When it comes to trading, most people make the error of spending most of their efforts on hunting for buy signals while paying little attention to when and when to leave their positions. For this reason, many traders are reluctant to sell when their positions are weak. You will not succeed as a trader until you get over it and learn to accept losses. If your halt is reached, it indicates that you were incorrect in your assumptions. It isn’t meant to be hurtful. Trades that are lost by professional traders outnumber those that are won, yet they still earn money because they manage their money and reduce their losses.
You should be aware of your options before entering a deal. Almost every transaction has a minimum of two viable exits. First and foremost, what is your stop-loss strategy in the event that the trade does not go your way? A documented record of the conversation is required. There are no mental breaks allowed. In addition, each transaction should be associated with a profit objective. You may then sell a part of your position and adjust your stop loss on the remaining amount of your position up to the breakeven point if you so want after you reach the breakeven point.
3. Specify the Rules for Entering the Competition
Because departure rules are significantly more essential than entry rules, this section follows the advice for exit rules. In a typical entry rule, the following might be stated: “Buy X contracts or shares here if signal A fires and there is a minimum target that is at least three times bigger than my stop loss and we are at support.”
Your system should be complex enough to be successful while also being simple enough to allow for quick choices to be made when necessary. The ability to actually execute trades will be tough (if not impossible) if you have 20 requirements that must be satisfied, many of which will be subjective. As a matter of fact, computers are typically more successful traders than humans, which may explain why computer programs create the vast majority of the transactions that take place on major stock exchanges today.
Making a deal does not need a computer to think or feel good. They are allowed to enter if the necessary requirements are fulfilled. When a trade swings in the opposite direction or reaches a profit objective, they close the position. Having made a few profitable deals, they do not get enraged with the market or believe they are invincible. Instead, then being driven by emotion, each choice is based on probability.
4. Maintain Impeccable Records
The ability to maintain records is something that many seasoned and successful traders possess. After winning a transaction, they want to know why and how they were successful in it. The most essential thing for them to know is how to avoid making the same errors again when they lose. Detail information such as goals, entry and exit points for each trade, the time of day, support and resistance levels, daily opening range, market open and close for the day, as well as notes about why you made the trade and any lessons learnt, should be written down in a journal or notebook.
Save your trading data as well so that you may go back and study the profit or loss for a given system, drawdowns (which are amounts lost each transaction employing a trading system), average time per trade (which is required to determine trade efficiency), and other critical elements in the future. A buy-and-hold strategy is also a good comparison for these considerations. Recall that you are the owner of a firm, and you are also the chief financial officer. Ideally, you would want your company to be the most successful and lucrative it can be.
5. Perform A Performance Analysis
Adding up the profit or loss at the end of each trading day comes second to understanding why and how. Put your findings in your trading log so you may go back to them later if necessary. Keep in mind that there will always be deals that are unsuccessful. In order to be successful in the long run, you must develop a trading strategy.
Profitable traders approach trading as if it were a legitimate company. If you want to be consistently successful in your trading and to survive in the trading game, although there is no assurance that you will earn money, having a strategy is critical.