One of the biggest issues in trading is maintenance of a balanced approach towards it.
A lot of new traders think that there must be some kind of secret to trading that the professionals and experienced traders know and the newbies aren’t being told about.
Truth of the matter is, there are no secrets. Trading is just like any other kind of business or work in which consistency, discipline, and a cool head make all the difference.
This is not to say that strategy and knowledge aren’t important. But no matter how good a strategy is, at the end of the day if a trader is not consistent and keeps making emotional decisions, the strategy will be of little use.
So what differentiates pros from the beginners?
There are a few things that expert traders have figured out and beginners struggle with a lot. They are listed below because identification is the first step to solving.
1. A Clearly Defined Plan vs. Spontaneity
Sometimes the market offers you a golden chance and then one should take it. However, these are rare occasions. For everyday trading, the rule should be to stick to the plan that has been tried and tested.
This is what expert traders do and one of the main reasons behind their success. Being too spontaneous means you are exposing your account to unknown risks.
2. Planning vs. Intuition
Experts know what they are doing and why. They have reasons for the moves they make. Their moves are not random.
A lot of beginners, on the other hand, often start trading without a solid plan and try out different things in the hopes that something will work. This is not a responsible way to trade and can lead to major losses in the long run.
3. Maintaining Records vs. Relying on Memory
Those who are in this business for the long term know the value of maintaining records. They record their trades, both winning and losing. This allows them to analyze what went wrong and where so they can avoid those mistakes in the future.
On the other hand, traders who go through trades without any discipline or proper documentation of them tend to repeat those same mistakes again.
Record maintenance is necessary if you want to improve.
4. Uniform Risk Level vs. Fluctuating Risk
Having a steady trade setup is crucial to being consistently profitable. If 1% risk is working for you, stick to it. This is what expert traders do. Reason for this is that when you are exposing your account to new levels of risk for each trade, it becomes difficult to trace and predict growth level.
If in one trade you lose 3% and in another make 2% then you will have been in overall loss. Consistent risk/reward makes it easy to track and predict growth.
Also, while we are on the topic of risk it is a good practice to set your regular stop loss but also start planning for a trailing stop depending on market conditions.
5. Disciplined vs. Haphazard Trading.
This has been discussed enough. Pro traders are disciplined and unsuccessful traders are usually not. However, when talking about discipline, it really is easier said than done.
To help you improve your trading, listed below are some practical tips to inculcate discipline in your trading.
Practical steps to maintain discipline
#1-Having a well thought out strategy
It will give you confidence in what you’re doing. When you know that your strategy is a good one and has yielded good profits before, it becomes easier to follow.
So put thought into it and make sure you are doing your research right.
Then test it on a demo account or with a smaller account in the start. Once you have tweaked and fixed it, you can start implementing it in full time trading.
Know that no strategy will lead to profits 100% of the time. However, above 50% means that your account is growing and that is a good number to aim for.
#2- Knowing the recipe to success
As stated before, there are identification is the first step towards solving a problem. Similarly, knowing So, here is what successful and expert trading usually looks like:
60% – Emotional Control
30% – Risk Management
10% – Trading Setup
Know that the most you can do is try. These tips and strategies can only guide you in a direction but ultimately experience is the best teacher. What you can do is make sure that your moves and strategies are not random.
Have a reason for what you are doing. Don’t rely on gut instinct and intuition only because then trading turns into gambling, and that never helps anyone.