Tag: Position trading

  • Trading Personality – How To Know What Style Suits You best

    Trading Personality – How To Know What Style Suits You best

    Trading Personality - How To Know What Style Suits You Best
    What are the main characteristics of different trading styles, how to choose the right one based on your trading personality? How to pick the trading style that suits you the most?

    By Guy Avtalyon

    I hope you figured out the ā€œbestā€ trading system for you but do you really know your trading personality? Of course, the trading system you chose is one that suits your personality, I hope. No? Where is the problem? How is it possible you made such a mistake? You tried with some quizzes on the internet, right? But is that the right way to figure out your trading personality? It’s for fun, for God’s sake! You must be serious when choosing the trading style, your money is in play.Ā 

    How to choose a trading style based on your trading personality?

    We have four basic styles of trading and each trader will choose the one that suits him or her best. We all have to choose between day trading, scalping,Ā  position trading, and swing trading. Which one will a trader choose depends on trading personality. In other words, our trading style depends on our personality.Ā 

    If you think it is an easy task I have to tell you’re completely wrong. Your trading style must be in harmony with your personal characteristics and knowing them is just half of your way.Ā 

    Are you still with me?

    Okay! Let’s go further!

    I suppose you’re new in this field. So, here is how to match your trading style with your trading personality. If you’re still reading this it is more likely you didn’t find the right trading style yet. I can help you.

    Finding the right trading style that fits your trading personality is extremely important. Otherwise, you’ll have losses. And nothing but the stress, losing money and finally you’ll give up. That decision could be wrong because you’ll miss the chance to earn money.

    How to choose the trading style that best suits your personality?

    If you never harmonize your trading style to your trading personality or even worse, if you never recognize what your personality is in trading, you’ll never become a profitable trader.Ā 

    But here is a tricky part. You have to be honest about your wishes and your possibilities. Moreover, you’ll have to put them in alignment. They have to walk side by side, supporting and taking care of each other.

    So, be honest when answering these questions.

    – What time frame do you prefer when trading? Is it position trading, swing trading, day trading, scalping?
    – How do you recognize yourself, as a fundamental or technical trader?
    – What is your risk tolerance?

    These are three basic questions and based on your answer you’ll figure out what is your preferred trading style. I have to repeat, you MUST be honest. The most important thing is to avoid your emotions. It really doesn’t matter what style you like more. It is all about how to match your trading personality with your trading style and you’ll have to do that without emotions.Ā 

    I know it is the hardest part.Ā 

    To put more pain into your life I have to tell you that you’re not choosing the style only, you’ll need to decide the type of trader you want to be.

    Are you a discretionary trader and system trader?Ā 

    Some of you will be able to recognize at first glance but the others will need to try both types before making any decision. Nothing is wrong with that. Always keep in mind that your hard-earned money is in play and you want to see it growing, not to lose it.

    From my point of view, both types have the potential to be profitable. But it’s up to you to find the one that suits you best. My choice shouldn’t be yours necessary. Choosing the right style and the right type of trading that suits your trading personality is an individual decision. What I can do for you is to give you some hints and clues on how to do that and avoid mistakes that could lead you to great losses.

    I want to share one secret with you – when choosing your trading style keep in mind that less is more. What does it mean? It is better to choose one strategy that works for you and when you master it and advance it, you can easily shift to another if it is necessary or you want changes.

    So, let’s go more deeply into each trading style and see how they match your trading personality.

    Position Trading

    Position trading is suitable for long-term traders since it is comparable with holding an investment for a long time. In position trading, your trades may last between several weeks to several years. The length of your trade will depend on trends because the main focus is on the price movements. Position traders seek stocks with the ability to grow in the long run. They believe when the trend appears, it is going to continue.Ā 

    Trading personality characteristics for a position trader

    First of all, you don’t like or don’t have time to monitor the markets all the time. Further, you’re not an aggressive type of trader. You don’t prefer instant treatment and, more importantly, you have a large portfolio.

    In what circumstances position trading isn’t suitable for you?

    If you are an aggressive trader this isn’t for you. Also, if you’re not patient and have a small portfolio, so you would like to enlarge it. Or maybe, you want to profit instantly.Ā 

    Day Trading

    For day trading style you’ll need a good education and large funds. For being a day trader you’ll need a great knowledge of short-term strategies and to recognize even the smallest market’s moves. Day trading is when you enter and exit the position during one trading day. Your profit will come from small changes in the market.Ā 

    Trading personality characteristics for a day trader

    You’ll need a great knowledge of the market you want to trade. Also, you’ll need a large capital ready to invest. In case you’re a quick thinker and quicj=k decision-maker this strategy is suitable for you. If you think you can maintain severe discipline, this could be the right trading style for you.

    In what circumstances day trading isn’t suitable for you?

    This isn’t a good choice for beginners or for the traders with a lack of capital. If you’re not experienced and tend to sell your winners too early or you’re keeping your losers too long, this style isn’t for you.

    Letā€™s go further! I hope youā€™re interested.

    Swing Trading

    In this trading style, you don’t need to continually monitor your trades. You’ll hold the position for a few days because you’ll follow the trend and it may last a few days. When it is an uptrend you’ll go long, while when it is a downside, you’ll go short. This is a perfect style for traders who have regular jobs and can’t monitor trades all the time.

    Trading personality characteristics for a swing trader

    If you’re patient and can wait for the best trading opportunity this is for you. This means you’re not going to panic when the trade changes direction and moves against you. In this style, you don’t need full-time devotion to the trade and you don’t need to make your trading decisions quickly.Ā 

    In what circumstances day trading isn’t suitable for you?

    If you feel nervous and get panicked when the markets change direction against your favor, it is better to avoid this style. Also, if you’re not able to recognize the trend. Trend following is very important in swing trading. If you canā€™t, just donā€™t swing.

    Scalping

    This is the quickest strategy among trading styles. You’ll take profits from tiny price changes, but they will frequently occur. If you want to become a scalper you’ll need to make several trades within a few seconds. For this style you;ll need a great and accurate exit strategy. You’ll have small gains but frequently. These small gains compounded, have the potential to generate a large profit. But be careful, this style could be a double-edged sword. Just one big loss could delete all your small gains.

    Trading personality characteristics for scalpers

    If you’re a quick decision-maker, and able to act without hesitation, this is your best pick. Also, you’ll have to be fully focused on your trades while performing them. This style requires a lot of time to devote to trades since you’ll need to act quickly. Moreover, you’ll have to know how to handle stress while trading.Ā 

    In what circumstances day trading isn’t suitable for you?

    If you’re not focused enough, feel stress while have to make quick decisions, or hesitate to trade

    How to pick the right style based on your trading personality

    I have to be honest, there is no magic or easy answer. It depends on your individual characteristics and conditions. Also, you have to take into account some other variables.

    The most important part is to be realistic and honest when evaluating your trading personality. You MUST know what trading style is easiest for you to handle, which style will best fit your abilities. When you choose one it doesn’t necessarily mean you’ll have to stick with it. You can change it. Choosing a suitable trading style is a process. It’s not set in stone. Hence, it’s changeable. But don’t change it fast and try numerous styles in a short time. Evaluate and estimate before choosing any. And stick to it even if you have losses at first. Try to find where you make mistakes and fix them, make some improvements. The trading journal will be a great help to do that. If you made the right decision you’ll take profit. Your loyalty will be rewarded.

  • The Best Forex Strategies to Trade the Market

    The Best Forex Strategies to Trade the Market

    The Best Forex Strategies to Trade the MarketHow to find the best Forex strategies and win the market? Here are some suggestions.

    By Guy Avtalyon

    The best Forex strategies are those that fit your circumstances and personality best. Right? We wish we could give you a direct answerĀ about what are the best Forex strategies.

    Well, we get this question frequently because we are the portal where everyone wants to find some answers about trading and investing.

    However, this is a complicated question.

    This article is essentially for those who are new to the world of currency trading. Also, they are questioning how they can make money from the forex market.

    The traders who are trading on demo or live accounts should also find some helpful advice in this article. Opposite to popular belief, you donā€™t have to be rich in order to trade forex today. All you need to start is a computer with fast internet and a small account with a broker.

    Before you enter into a position, you need to know when you are going to exit the market. WHEN is the most important resolution.

    A trader is not going to hold onto a position endlessly.

    How long you want to hold onto your open position will define your exit points and prices. If you pick to hold a position for a week, your profit goal would naturally be higher than if you were to hold it for a few hours. That is because you would expect the price to move further, given a longer period of time.

    You have to make your personal decision w depending on your risk tolerance level, lifestyle, and the amount of time to be dedicated to analyzing the market.

    Here are Traders Paradise’s choices that we want to show you better.

    The best Forex strategies that work:

    1. scalping
    2. day trading
    3. swing trading
    4. position trading

    So, we have to explain each of them.

    ScalpingĀ 

    This is the shortest time frame in trading. It employs small changes in currency values. It is the ultra-rapid action of opening and closing of a position within a few seconds or minutes. The aim is ‘stealing’ a few pips from each trade. The profit of the winning trade is not big. Hence, the number of such winning trades should be big enough so that these small profits can add up to a decent amount.

    Scalpers must have access to the tightest spreads and fastest connection speeds possible. Of course, in order to carry out this very fast trading, with the tiny profits.Ā  They perform this many times a day. Scalpers have to perform many sequences, to collect small profits. Losses must be limited but in a way that one large loss does not delete out the profits from winning trades.

    Many forex market makers will not allow this type of trading. Simply, they think it is difficult to cover the opposite side of the transactions. The reason behind this is fast speed and numerous orders entered into their systems.

    Day trading is one of the best Forex strategies

    This is one of the popular types of trading. The traders open and close positions within a day. They also almost never hold their positions overnight due to the higher risk. What to do if prices change dramatically while they sleep?

    Their trades last from minutes to hours. Day trading relies constantly on intraday momentum to bring the current price to the aspired price level in one direction.

    Day traders are looking out for signs that a currency pair has a high probability of moving in a particular direction. Ā For day traders, a currency pair must go from point A to point B, within a day. Doesn’t matter whether the price is moving in a trend or range. Such traders know to wait for good trading opportunities, instead of trading madly like scalpers tend to do. This style of trading requires full concentration. It is the priority, the positions must be closely monitored on the price charts.

    Swing trading

    Swing traders hold their positions for a few days, but rarely more than a week.

    Identifying and driving on trends early is the central objective of this trading style. The profit goal tends to be set higher than that of day trading. Hence, the swing trader is expecting that by holding out for a few days, there is a better chance of capturing a larger price movement.

    Unlike the day trader, the swing trader has to deal with overnight risk. Swing trading requires less monitoring of the market. This type of trading is generally favored by people who hold their day jobs.

    Honestly, if swing trader wants to be successful, such must still keep up-to-date with the latest fundamental and technical changes in the market. Even if they are not monitoring the market all the time.

    Position trading as one of the best Forex strategies

    For many traders, this is one of the best Forex strategies. Position trading involves the longest period. It refers to traders holding their position for weeks or even months. Position traders attempt to recognize and trade currency pairs that signal that a medium to long term trend is playing out, but will take more than a few days to play out.
    Position traders usually close their positions while the trend is most powerful before it loses power.
    This trading time frame doesn’t demand a lot of time. That is the difference from others. There is not much need for absolute monitoring.
    If you practice position trading, it is smart to place a trailing stop. This will automatically close your position if the price retraces past a particular point

    When you try to find what are the best Forex strategies, you must have several things on your mind

    As a general rule of thumb: the smaller the time frame you trade then the more time is needed to be devoted to monitoring the markets. For example, day traders tend to be more in touch with the price swings and the goings-on of the market. You know, the positions are opened and closed on the same day.

    On the other hand, a position trader does not have to monitor the market so intensively. This is simply because the market has more time to move against them. It can move a lot further against them than it is possible in a smaller time frame.

    However, you have to decide on the length of your holding period. That must suit your personal preference by adjusting the profit target and stop-loss accordingly. Of course, the size of the profit goal and stop-loss will be equivalent to the length of your holding period.
    What does it mean?
    If your trading time frame is small, your target profit and stop-loss should be smaller. And vice versa. If you have a longer time frame, your profit target and stop-loss should be wider.

    Donā€™t waste your money! Never traded in your life? Stay tuned!Ā 

  • Position Trader: Know When To Go Long or Short

    Position Trader: Know When To Go Long or Short

    Position Trader: Know When To Go Long or ShortPosition trades requires just a half of hour work per day, but profits can be great.

    By Guy Avtalyon

    Position trader has a long-term approach to trading. Rather than ready, set, go, itā€™s more like ready, set, stay for a while. It is a trading methodology that seeks to capture trends in the market.

    The idea is to reach the income without getting stopped out on the retracements. Hence, it is great for traders who prefer analysis but may not have as much time to dedicate to continually watching stocks.

    Here, weā€™ll give you some insight into the pros and cons of position trading. Including what it is, is it right for you, and how to start.

    When it comes to trading, do you go long or short?

    Many traders do not have the time to trade the most well-known styles such as Intraday, Day, or Swing Trading. All of these styles want more time, a higher capital base, and the ability to be trading early morning or afternoon while the market is open.

    Position trading is a unique type of trading that is defined by longer holds of security. It provides an alternative that is actually more profitable with less time.

     

    Typically position traders hold time anywhere from a couple of weeks to a couple of months, which is the resistance that will stall or reverse the trend.

    But, it applies the same fundamental research methods as shorter-term trading.

    Pros:

    • It requires less than 30 minutes a day
    • Itā€™s fitting for those with a full-time job
    • Less stress compared to swing and day trading

    Cons:

    • Youā€™ll watch your winning trades turn into losing trades, often
    • Your winning rate is too low. It is around 30 ā€“ 40%.

    Can you accept this?
    Excellent!
    Letā€™s go further!

    If you search online for position trading, you will find a decent amount of information about forex trading.

    But very limited information you can find about position trading stocks.

    Let’s say, the first challenge, then, is to find a definition of position trading.

    Position trader definition

    A position trader is a trader who holds a position, usually stocks, for the long-term. It can be from weeks to months and even years. Position traders usually use a combination of technical and fundamental analysis. That’s in order to make proper trading decisions and often do more to evaluate the companies behind the stocks.

    Position trader, often known as ā€œbuy and holdā€ trader, takes longer-term positions usually based on long-term charts and macroeconomic circumstances. These traders work in almost every market, including stocks, ETFs, forex, and futures.
    They arenā€™t only committed to buying. They can also hold long-term short positions making money as an asset decline in value.

    Position trading benefits

    Position trading is taking a position in an asset, expecting to participate in a major trend. Such traders arenā€™t concerned with minor price fluctuations or pullbacks. Instead, they want to capture the bulk of the trend, which can last for months or years.

    The main glamour of this approach is that it doesnā€™t require much time. Once the fundamental research is done, and the position trader has decided how they want to trade the asset, they enter a trade and thereā€™s little left to do. They monitor their position from time to time. But since trivial price fluctuations arenā€™t a concern, the position requires little oversight.

    Who is a position trader

    It is the opposite of the day trader. Day traders make trades each day and spend hours trading.

    Swing trading is less time-intensive than day trading since trades last a couple days to several weeks. But this still expects time to monitor and find new positions each week.

    Position traders usually make zero or three trades a year in assets they own. Swing traders would make a few hundred trades per year, and day traders would make hundreds to thousands of trades at the same time-frame.

    Where to find trends

    Support and resistance let you buy low and sell high.

    An uptrend occurs only after breaking above the highs of a range. So, if you want to enter your trades before the price breaks out, you have to do so at the moment when the market is changing.

    And the best place to go long is at support, the point when the market is moving.

    Trends often begin with a breakout of a range or other chart pattern that had limited the price action. So, when the price breaks out of the pattern it can often trend for some time. This is especially true if the chart pattern lasted for a number of years. That indicates the price could trend for a number of years once it breaks out.

    Chart patterns range, triangles, cup and handles, head and shoulders, an inverse head and shoulders, all indicate a trend could begin or re-rise.

    As an investor, you want to pick a stock that will benefit you over time from a long-term trend.

    The timeline isnā€™t a fixed and unchangeable part, Ā you might hold a position for a week to even years.

    In an aim to ensure that your investment can pay off over time as a position trader, you need to put a lot of emphasis on fundamental analysis. You have to do plenty of research about potential companies, examining press releases, earnings reports, and analyzing charts before making decisions about which stocks to trade.

    But position trading is not the same as long-term investing.

    When position trading you must have this approach: itā€™s actually the last level of trading before you called it long-term investing.

    The main difference between position trading and long-term investing is that the former can be a long-term position, but depending on the trajectory of the trend, it might not be. Hence, the latter is only a long-term position.

    Why use position trading

    This is a simple but important fact: If you want to be a successful trader, itā€™s important to figure out what type of trading the best suits you.

    This is usually the sum of various factors:

    • The size of your account
    • The amount of attention and time you can dedicate to trading
    • How fast you want to grow your account
    • And last but not least, of course, your risk tolerance.

    Your trading experience also matters.

    We wouldnā€™t tell anyone to jump right in and try to take advantage of pre-market trading, for example.

    This is a more advanced method that requires experience and courage.

    How to find position trades

    There are several ways to position trading. For example, buying assets that have strong trending potential but havenā€™t started trending yet. Or alternatively, buying an asset that has already begun to trend.

    Buying assets that have already begun to trend is a less intensive attempt. Hence, it is favored by many position traders.

    Finding a trend is the main component of a position trade. This will usually eliminate any assets trading within a range.

    Unless the price range is very large and crosses for many years. In such a case, it could take years for the price to move from one side of the range to the other. But this suits the position trader very well.

    Is a position trader a long-term investor?

    No, it’s different. Being a trader, what might attract you to try this style?

    The main benefit, position trading is somewhat accessible to new traders. The speed isnā€™t as wild as day trading or swing trading. So you have a bit more time to draft your course of action and build a trading plan.

    Position trading is less demanding on a day-to-day basis. You donā€™t have to watch charts on an hourly basis. All that is need is to check your investment to make certain itā€™s operating according to the trend you identified previously.

    On a deeper level, position trading can also be more attractive in various types of markets.

    For example, if there is a bull market in a scene and there are strong rising trends, it can be a good time to engage in position trading.

  • Position Trading

    Position Trading

    Position TradingWhat are the benefits and disadvantages of this trading style? All explained.

    By Guy Avtalyon

    The position trading is an approach to trading in which the trader either buys or sells contracts and holds them for an extended period of time. It also refers to the longest term trading. You can have trades that last for several months to several years. This kind of Forex trading requires a good understanding of the fundamentals. Let’s say it isn’t for traders without patience. So, why is that?

    What does Position trading require?

    Patience. Fundamentals force the long-term trends of currency pairs. Hence, it is very important that every new trader understand how economic details can affect the domestic financial outlook. In this kind of trading, the trader has to hold theĀ trade for a long time. Stop losses will be very large.

    That indicates that the trader must have stable capital. Otherwise, the trader will get a margin.

     

    What does taking a position trading mean?

    Taking position trading means a position you take when you buy or sell securities. If you buy Ā a stock, future or option, it refers to a Long Position

    But if you sell-short a stock, future, or option, it is Short Position. In short, the word position describes your action and view on security/shares/futures, etc.

    By taking the position in the stock is something you do to earn money from the stock market.

    Very simple.

    How to earn money in the stock market?

    By purchasing a stock (called taking the position) and then selling that stock (closing the position).

    Or by selling the stock (called taking the position) and then buying that stock (closing the position).

    However, the duration of your position can fluctuate depending upon your strategy.

    It could be for a few seconds, or a few minutes, or a few years, or 20 years. It depends on your personal psychology and goals you want to achieve.

    What is the basic analysis of this trading method?Ā 

    Read the charts or use some fundamental analysis before trading.

    When you buy a particular stock always lookout for high volumes.

    Of course, donā€™t buy all the shares at once. Buy it in installments. You have to buy at a lower price. So averaging can helps a lot and donā€™t forget to put stop loss.

    Sometimes market swings beyond our expectations and things may not go well. In that case, you need to exit on time and always make a substantial profit and move on.

    You are not married to the stock, so you can always buy it when it corrects.

    What is position trading?

    Let’s say it again, the position trading, also known as ‘trend trading’, can best be described as a ‘buy and hold’ method.

    If you want to become a forex position trader you must be the independent brain. Sometime you must ignore popular views and make your own presumes like, to where the market is going.

    You must understand fundamentals and have good vision into how they affect your currency pair in the long run. First of all, actually, you must have enough capital to withstand several hundred pips if the market goes against you.

    Long-term Forex trading can net you several hundred to several thousands of pips. If you are too excited being up 50 pips and already want to exit your trade, examine moving to a shorter-term trading style.

    You have to be very patient for this trading style.

    For position trading, historical points of support and resistance are maybe more important than indicators. The most important is to draw straight horizontal lines and use different time frames. The longer the time frame, the more important level. For this trading style, once again, you must have enough starting capital, you must be patient.

    So, what might entice you to try this style?

    Firstly, position trading is very convenient for new traders. The speed isnā€™t as wild as day trading or swing trading. Hence, you have a bit more time to plan your activities and create a trading plan. On a wider level, position trading can also be more attractive in different types of markets.

    For example: If you are in a bull market where there are strong emerging trends, it can be a good time to engage in position trading.

    You will not see the result fast, it will take time. We are speaking about months and years, not hours or days.

  • How to create your first trading strategy

    How to create your first trading strategy

    How to create your first trading strategy
    Find how to create your first trading strategy, what to look at and how it differs from investing strategy

    By Guy Avtalyon

    Okay, you want to create your first trading strategy and, to be honest, I understand your dilemma. You would like to be successful and you want to know, what strategy should you choose to nail it.

    Listen,Ā there!

    What is the trading strategy?

    A trading strategy is a set of trading settings that serve the currency trader or stock to determine whether to buy or sell a currency or stock, where to enter and exit the position.Ā  And how much capital they invest in trade, and in doing so, earn a difference in price. Ā 

    The trading strategy is a fixed plan that is designed to achieve a profitable return by going long or short in markets.
    A broker can offer you the opportunity to enter into trades that are multiple times the value of the margin that you place. The market is fluid and you can open a trade or exit from one very quickly, so there is potential to make considerable returns.

    What is the investing strategy?

    The investment strategy is a set of rules, behaviors, or procedures, designed to guide an investor’s selection of an investment portfolio. People have different profit objectives, and their individual skills make different tactics and strategies appropriate.

    To complicated? Wait!!! There are more!

    A trading strategy can be – automated (various robots for trading, etc.) – manual (the vast majority of traders use their own trading system.)

    We would like to show you some of them which are successful. We will give you a brief description of 5 simple strategies that can help you to maximize your profits:

    Swing trading

    You can enter a successful swing trade by timing your trade. Do that when is a breakout after a consolidation.
    What does this mean? A period of consolidation occurs when a currency pair moves in an almost precisely defined price range. A breakout will occur. What really happens is that the values of the currencies ā€œbreakoutā€ the resistance level. If you predict the breakout accurately, you’ll profit from that trade.

    A swing trade uses a channel trading strategy. Trades take place between the support and resistance levels of swing highs and swing lows.

     

    Rangebound trading

    Here you will need to identify a currency pair that trades within a certain range. Then, you have to identify the support and resistance levels and then time your trade by taking these movements into account.

    It is likely that there will not be a big difference between the upper and lower prices of the range. Because of this reason, you could trade in one of two ways.

    The first option is to trade within the range which will limit your profits as the price difference is bound to be minimal.

    The second way is to look for a breakout from the range. If this happens, you will have to react quickly. You can make a quick profit, but you can lose out. When you see a ā€œfalse breakoutā€ be extremely cautious because it may mean the market is moving against you so you’ll end up in losses.

    Position trading

    A position trade is not a short-term trade. It is based on macroeconomic trends. It could run over weeks or months or years. Traders take a long-term position based on an understanding of how inflation or the rate at which an economy is growing, will affect the value of a currency.

    If you want to adopt this strategy, you have to stay stick to two rules. First, do not use much leverage. A maximum of 10:1 is quite good in the forex trading. Secondly, the size should be relatively small. This is because you are thinking that some large movement in the relative price of the currency pair is possible.

    Carry trade

    A carry trade means to enter the trade that could take advantage of the interest rate differential of the two currencies.Ā  That means you will be selling a currency with a low-interest rate and buying one that provides a greater rate of interest. Normally, you would choose a currency pair where the higher interest rate currency will appreciate to the lower interest rate currency.

    Carry trades can be high-risk. They are based on a combination of technical and fundamental analysis.

    Momentum trading

    Well, you have to know that the price constantly lies, but momentum tells the facts.
    At the simplest level, you can use momentum trading when rates are going up, then you should buy and when they are declining, you should sell and maximize your profits in the forex market.

    If you want to implement this strategy, you have to identify the currency pairs that show the greatest momentum and have moved most strongly. It is possible by tracking price movements over a period of several weeks.

    Then trade those pairs that show the greatest momentum.

    What do you need to be successful in trading?

    Let’s go back to the beginning and say a few words about how for every trader is important to use a reliable and robust trading platform. You will need an Expert Advisor (EA). It allows you to conduct backtesting of your trading strategy before you commit your funds. You will need one that functions effectively on your smartphone and your tablet as well, a versatile platform that works well under Windows, MacOS, and Linux.

    A system with 100% success does not exist so that you must not expect any of these systems to get your earnings each and every time. But, while following all the rules you can only end up in the plus!

    How to create the first trading strategy?

    New traders start to learn trading strategies from other traders. They are mirroring strategies from experienced traders. But, how do they get started with their trading strategy?

    Fun fact 1: Creating your first trading strategy is easy.
    Fun fact 2: Creating a profitable trading strategy is hard.

    Basically, you have to follow some basic steps while formulating your first trading strategy. Building your own can be fun, easy, and surprisingly quick.

    But, don’t expect your first trading strategy will make you rich.

    So, what you have to do?

    Recognize the real reason why you want to enter the market and have principles.

    Before you start creating your own trading strategy, you must have an idea of how the market works. Most importantly, you need to answer this question.

    How to make money from trading?

    To answer this question you have to read and learn about both technical and fundamental analysis. Avoid get-rich-quick offers.Ā  Take care of demand and supply. Never have trust in theories that claim that people are perfectly rational.

    Your principles will define your every step in the market, so it is very important to stick with it. It will need your full attention. It is an urge to follow one principle in your first trading strategy. Never choose complicated solutions. The simpler, the better. Trade by the KISS rule (Keep It Simple Stupid).

    In the beginning, you don’t want to be astounded by a complex strategy. Besides, a trading strategy with more moving parts is harder to manage and improve.

    How to choose a market for first trading strategy?

    What do you want to trade: Forex, Options, Futures, Equities?

    If you want to trade forex, you have to understand what you are buying and selling with a currency quote. You have to learn about the different models of forex brokers.Ā  You have to know how the margin is calculated. If you want to trade equities, you must know what a share means or the difference between a blue-chip and penny stock.

    Thereā€™s a lot to learn about each market but you can not start to learn until you choose your trading market. The rule of thumb is that you must understand the market you choose to trade.

    Define a trading frame

    Yeah, I know.

    Itā€™s not easy to decide on a trading time frame. At first, you will not know if you like more quick scalping or daily swing trading.

    Maybe an idea to try intraday trading isn’t bad. You’ll be able to watch the market for long-term periods. But you have to know, when you trade fast time frames, you get fast feedback which shortens your learning period.

    If you are not able to watch the market for long-term periods, start with end-of-day charts. With some effort, you can learn enough to decide if swing trading is for you.

    What have you to define?

    Entry trigger. – It will help you enter the market without hesitation or demur. Both, bar and candlestick patterns are useful triggers. If you prefer indicators, oscillators like the RSI and stochastics are good solutions also.

    You have to plan your exit trigger. – The market can go against you, causing you limitless losses. Having a stop-loss option is crucial. You need to plan when to exit if things go wrong and also you need to plan when to exit if things do go your way. The market will not go in your favor always. That’s why you have to know when is the moment to take profits.

    Take care about the position size

    Set your risk limit. – Once you have your entry and exit rules sorted out, you can work on limiting risk. The basic way to do so is by position sizing. This means that for a certain trading setup, your position size determines how much money you are putting on the line. If you double your position size, and you will double your risk. You should be very careful about your position size.

    And it’s time to choose a tool to determine the trend. – You donā€™t trade when you see a Pin Bar (shortener for ‘Pinocchio Bar,’ a single candlestick set up that clues price action traders into potential reversals in the market). Trade only when the market is rising, and you should use a bullish Pin Bar to trigger your trade. You donā€™t trade when you see a Gimmee Bar (price action reversal candle formation). Trade only when you conclude that the market is going sideways, and you use a Gimmee Bar to enter the market.

    You have to decide on a tool to help you judge the market context, trending or not, up or down. For example, choose price action tools like swing pivots or trend lines. You can also use technical indicators like moving averages and MACD (Moving Average Convergence Divergence).

    Write down your first trading plan

    Write down your trading rules. – It is always good advice. Your trading strategy is still simple and you might be able to memorize the trading rules. But you must write down your trading rules. If you write down the trading plan you will get a robust and trustworthy method. Just in order to ensure discipline and consistency. It also gives you a record of your trading strategy. You will find it useful when you have to improve it.

    When you have written rules, you can backtest the strategy. – When you have a discretionary trading strategy, backtesting can be an arduous process. Discretionary trading is decision-based trading where the trader decides which trades to make based on current market conditions, and system trading is rule-based trading where the trading system decides which trades to make, regardless of current conditions. So, if you have a discretionary trading strategy you need to replay the market price action and record your trades manually.

    But if you have a mechanical trading strategy and a coding background, you can speed up this stage. Looking through the trades one by one is a fantastic way to develop your market instincts. This can also help you think of ways to improve your trading strategy.

    Should you be worried if the first trading strategy is not profitable?

    Itā€™s okay. Your trading strategy is not fixed, it is a living thing. As your experience and knowledge grow, your trading strategy will improve. Try to avoid radical changes to your trading strategy.

    Your goal is to achieve a positive expectancy with every trade. Not positive profits for each trade. Statistics have to work for you.

    One thing is the most important when you create your first strategy and enter the market for the first time.

    Donā€™t be stubborn on the market. That could be the biggest mistake.