7 best practices for your first year in trading

If I could turn back time, these are 7 best practices I wish I knew when I first started trading...

#1: Don't take it personally

let me ask you...

How do you feel when the market hits your stop loss?

What if you have 5 losing trades in a row?

What about when the market hits your stop and then quickly reverses higher?

Now, if any of this happens to you, it's easy...

Blame the market for "targeting" you

Blame Your Broker for Chasing Your Stops

Accusing institutions of manipulating the market

But think about it, does this make sense?

But in fact, it's not. that's why……

the market doesn't care about you

This market is huge, with thousands of "players" and billions of dollars in transactions every day.

The market has no incentive to hurt you or single you out because it doesn't care about you (or, more bluntly, it doesn't even know you exist).

So don't think the market is going to get you because you're just plankton in this financial ocean.

Reputable brokers have no incentive to chase your stops

A legitimate broker that has been in business for years has no incentive to chase your stops.

Why?

Because they risk losing customers forever.

With the power of social media and review sites, this can damage a broker's reputation and drive them out of business.

From a risk-reward standpoint, having a broker looking for your stop is not a good thing.

So does that mean the broker won't chase your stops?

No, because that sort of thing can easily happen to shady brokers who are short-sighted.

However, for reputable brokers who have been in business for many years, this is unlikely to happen.

The market is rigged, that's the nature of this industry

Yes, financial markets are being manipulated against you.

Those with deep pockets can move the market "temporarily" to trigger stop loss and option expiration levels.

So in my opinion you have two options.

You can blame the system, but it won't do you any favors other than more loss and frustration.

Alternatively, you can learn how the game is played and profit from it.

this is your choice.

#2: Don't tell your spouse, family or friends

you want to know:

"Why can't I tell people I'm a trader?"

Well, if you are a consistently profitable trader, go ahead. There is no problem.

If you are not, then it is best to remain silent.

That's because when you tell your friends you're a trader, the first question you'll get is...

"Did you make any money from trading?"

Your answer is probably no.

You don't feel good when you think about your loss and how incompetent you are.

Next time you see your friend again, guess what's the first question he'll ask you?

"Did you make any money from trading?"

Again, your answer is no, and you're going to be horrified about it.

Now, the next time you see your friend, guess what question he'll ask you?

You see what I mean.

So, to avoid this "trauma," don't tell anyone about your trading endeavors -- not even your family.

#3: Start Small

let me ask you...

If you could afford to lose $100,000 without affecting your lifestyle, how much should you have in your trading account?

100,000?

wrong answer.

That's because when you first start trading, you will be at your worst.

You will make trading mistakes, give in to your emotions, and do things that are not good for your account, such as averaging losses, widening stops, etc.

That means your $100,000 won't last long.

solution?

Start with a small trading account.

That way, your mistakes won't be costly, and even if you lose everything, you'll have money left over to fund another trading account.

Because no matter what, you have to pay tuition to the market.

The only question is, do you want to pay more or less?

#4: Master Risk Management

Risk management is about taking steps to protect your trading account so that even if you lose 10 times in a row, you won't lose all your money.

It's one of the easiest things to master and will pay off even decades after your trading career.

So how do you apply risk management to your trading?

Here are some things to follow...

Know when to quit if you're wrong

Don't lose more than 1% of your trading capital

let me explain...

#1: Know when to quit if you're wrong

Before taking a trade, you must know where to exit if you are wrong.

This can use stop loss levels, time based stops etc.

No matter which technique you use, you must have a plan to get out of failure, or your account will churn day after day.

If you want to learn more, read The Complete Guide to Stop Loss Orders.

#2: Do not lose more than 1% of your trading capital

Now, having an exit plan is the first step.

But if your position size is wrong, your account could still be wiped out when your stop loss is hit.

So, how to avoid this situation?

The key here is that even if the market goes against you, you lose a small amount of money.

To do this, you must know the stop loss level and calculate the proper position size.

If you want to learn more, read The Complete Guide to Position Sizing.

Bottom line is this...

Stop loss and position sizing go hand in hand.

When you increase your stop loss size, decrease your position size.

When you decrease the stop loss size, you can increase the position size.

Know their relationship and you won't screw up again.

#5: Learn everything from start to finish

As a new trader, there are some things you know but don't.

Then, there are things you don't know you don't know (and even more).

So don't focus on one technique or strategy prematurely because it might not be a good fit.

Instead, explore your options.

Learn as much as you can about trading, whatever you can.

Such as intraday trading, swing trading, RSI, MACD, stochastics, moving averages, contrarian trading, trend following, etc.

Now things go like this:

Not every trading tool you learn will work for you.

But the key is to understand what it is, how it works and its purpose.

For example:

A moving average is a trend following indicator (what it is).

It works by calculating the average price for a given period and plotting it as a line on the chart (how it works).

You can use moving averages to trail stops, identify value areas, and screen for trending market conditions (its purpose).

Now…

Once you understand the different tools, you can choose the right tool to meet your needs instead of blindly following trends.

Reasonable?

Pro tip:

Eventually, you'll realize that 90% of what you've learned is irrelevant.

You drop them and focus on that 10% that is enough to make you a winning trader.

#6: Decide if a deal is right for you

As much as I hate to say it, not everyone can be a trader.

Just like not everyone can be a doctor, lawyer, engineer, etc.

Therefore, if at any time you feel that trading is not for you, it is wise to get out.

Yes, you may have lost the time, energy and money you put into trading.

But the worst thing is throwing more resources at it, knowing it wasn't the intention.

do you feel me

There's no shame in giving up, and you're not a loser.

Successful people always give up until they find their calling and give it their all.

If trading isn't for you, it means you haven't found your calling.

I repeat, there is no shame in giving up.

Pro tip:

If you think about it, trading is a means to an end, not the only medium to an end.

You can also do things like e-commerce, blogging, content creators, and more.

#7: Don’t quit your job just yet

Let me share a true story with you...

John (pseudonym) has just started trading the Forex market.

He funds a live account and makes a $1,000 profit after a few trades.

So he thought to himself...

"If I can make $1,000 trading part-time, I'll make more money trading full-time."

So John quit his job to pursue trading full-time.

The first few days were good as he continued to profit from the market.

Then the market changed and losses followed.

In the end, he returned all the profits and destroyed his account.

Now, he's back on the job market looking for work.

So, what's the lesson?

Don't quit your job yet.

Just because you've made some money from the financial markets doesn't mean you can do it full-time - that could be beginner's luck.

Additionally, trading full-time requires a different mindset, account size, expectations, etc.

in conclusion

Here's what you learn:

Don't take things too personally because the market doesn't know who you are (or care what you do)

Don't tell your family and friends about the trade and you will feel less stressed

Start with a small trading account because your mistakes won't be costly

Master risk management as it will pay dividends for the rest of your trading career

Study as much as you can so you know what resonates with you, then dig deeper into the topic

Trading isn't for everyone - there's no shame in giving up

Don't quit your job until you're a consistently profitable trader (a few winning trades don't count)

Now it is your turn…

What are some good practices to follow in your first year of trading?