When I was a beginner, I didn’t know even a third of the tips listed below. More than once I had to talk about how much money I lost in the first two years on the market. This amount is approximately equal to my income for 10 to 12 months. For most people, losing their annual earnings is essential. I highly recommend that you read this list of tips for beginner traders and take them on board.
1. Learn and learn again
I’ll start with the most obvious advice – spend as much time as possible on learning. The main problem for a beginner is the lack of knowledge. Some say that on the contrary, if you don’t know anything, you will trade better. This is complete nonsense. Until I learned elementary terms and strategies, I lost my entire deposit within a day.
What to do:
• read the main books on trading – it’s minimum;
• to take training courses from professionals is the most reasonable and useful step, but remember that the choice of a mentor must be approached responsibly;
• regularly monitor the market and communicate in communities where there are experienced traders.
2. Don’t rush to trade for real money
The best thing you can do for yourself in the first year is not to deposit real money. Why? You will still lose them, the chance is 99.9%. I didn’t believe in the first stages either, but the market quickly proved everything to me. If you are as stubborn a person as I am, then I sympathize with your wallet. Remember the statistics that I have mentioned many times in my articles.
What you can do instead of trading with real money:
• open a demo account;
• participate in free contests – almost every second broker has such, and the prizes are quite impressive;
• invest a free amount in your training – buy a quality course from a guru and take it.
3. Thoroughly test trading ideas in simulators
I consider the following advice to be one of the most important – use testers and simulators in trading. With their help, you will find out exactly which strategies work in the market, and which ones, on the contrary, only drain your account. When I first tested most of the ideas (moving averages, oscillators, trend lines, etc.), I was horrified how long you can lose money believing in all this stuff.
The scheme of actions is very simple:
1. Install the tester in the MetaTrader 4 terminal.
2. Load the required instrument, for example, EURUSD.
3. And open virtual trades, rewinding the chart like a video.
During testing, you can follow the yield curve, and at the end you will receive detailed statistics as for an advisor. Popular strategy testers analyzed here…
4. Do not lose your head at the first successes
Let’s say you find a profitable trading idea, learn from the pros, and stop losing money. At this stage, there is a very insidious psychological trap that can destroy you as a trader once and for all. It lies in the “star” disease. The speculator begins to think that he has conquered the market and can accept investors’ money and then make millions. As a result, risks increase and large lots are opened in order to win back the loss, etc.
What happens in this case:
• the market changes, the strategy temporarily starts to work worse – the trader loses money (it was just necessary to survive this moment in the drawdown, following risk managementrather than merge everything);
• psychological breakdowns occur – it can almost reach Martingale, and the account will be reset.
As a result, it is very important not to lose your head, but, unfortunately, this skill comes only with experience. Lucky beginners will fall into this trap in 90% of cases.
5. Don’t listen to analysts and other people’s advice about transactions.
Most analysts who write forecasts do not really trade. This is their job, it is important for them to draw a beautiful and complex chart that the broker’s clients will believe in. Whether you lose money or earn money, they don’t care, their task is to make a forecast. The more sophisticated he is, the more they trust him.
In about 50% of cases, these ideas work, but first, the market moves in the opposite direction and shakes everyone out by stop loss. As a result, determining the direction of the trend is easy, but making money on it is much more difficult. You will need to find a profitable entry point and exit the trade in time. This is exactly what is missing in the next analytical review.
6. Leverage is your # 1 enemy
Many novice traders have no idea how dangerous leverage is for them. This is especially true of the Forex market, where it can reach 1 in 2000. By opening a position of such a volume, a trader again dooms himself to a drain in 99% of cases. The market just needs to go a couple of ticks not in its favor.
For example, people who started out in the stock market, trading without leverage, will last much longer. Typically, they lose their deposit within 6 – 12 months. While in Forex this goal can be achieved in 15 minutes. Which of them will get more experience and have a higher chance of success? The answer is obvious.
7. Keep a diary of transactions and mistakes
Trading and learning should be taken very seriously. The best method for keeping track of your own progress is with a journal. What should be indicated in it:
• your mistakes – with their help you will be able not to get up several times on the same rake;
• each deal with a screenshot of the chart – so you will understand when you are just lucky and when the position was opened correctly.
In addition, it is useful to use various services to track your trading statistics. For example, Myfxbook on Forex, here you can see clearly not only the growth of the deposit, but also pay attention to drawdowns.
A very convenient function is to view losses by hours. With its help, you can identify the worst time to trade according to your strategy and optimize it.
If you work on the stock exchanges in Russia or the USA, as well as on the derivatives markets, then the Marketstat service, which has more advanced functionality, is suitable for you.
8. Don’t quit your job for trading if you have no other source of income
Living out of the marketplace and quitting your unloved job is what most newbies dream of. Unfortunately, this is one of the saddest and most fateful mistakes one can make. What’s happening:
• a person quits work and begins to rely on the market – the emergence of hope is the first psychological trap;
• then the trader expects to receive a salary from transactions every month, but suddenly a losing streak appears and the next 30 days are closed at zero at best – the second trap, fear appears;
• even if the speculator has a reserve of money outside the market, then it begins to deplete rather quickly – anxiety is growing;
• a year closed at minus or zero – despair.
Most of the professionals I have met or read their interviews have always talked about the need for a stable source of income outside the market. You will live with it, and trading is just a way to earn extra money in the long term.
9. Do not take money on credit to make a deposit
Another tip that overlaps with the previous one is not to try to borrow money to start trading. This is a very gross mistake, since the same scenario that I described above will be repeated. As a result, you will pay from your salary and not even for the purchased item, but for the money poured into the market.
Investments from your friends and acquaintances can be classified in the same category. If you do not want to let down close people and destroy relationships, then I do not recommend taking their money. Every trader has periods of losses, it’s only a matter of time. By the way, drawdown article…
Professionals can carry out trust management, but only on the basis of an agreement, where it is clearly stated that a person is ready to lose all invested funds or within the drawdown percentage. As a result, no one should have any claims and requirements.
10. Turn off emotions, trading is work
A final tip – do not try to get emotional satisfaction from winning trades and suffer grief from losing trades. Why? This will throw you off balance. Where there is joy, there is despair. As a result, every profitable position will be a pleasure, and every loss will be a pain. All this leads to the drain of the deposit. This is where the exchange market stands, greed, fear and hope reign here, precisely because of them, after a long trend in the instrument, there can be a collapse to zero.
An ideal trader is a robot that follows a strictly defined algorithm and strategy. A person cannot be such, therefore it is natural for him to make mistakes. The analogy is drawn in many areas of life. For example, if you board a plane, which pilot will you trust:
1. An unstable beginner who loves his job and enjoys it. Surely he did not study flying perfectly, he may not know all the rules.
2. An experienced pilot without emotion. He knows exactly what and how to do, always follows the instructions that are designed for the safety of people. At the same time, he knows that any mistake in the air costs life.
Personally, I would fly with a co-pilot. Emotions are best experienced in other daily activities, and not in responsible work.
As a result, in order for a novice trader to make fewer mistakes, he needs to learn as much as possible. At the same time, you should not try to immediately trade for money, it is better to try your hand at demo or free contests. After achieving the first success, you should not rush into trading “headlong”, collecting loans, investments from friends, quitting your job. This always leads to despair, because the market is unstable, the income from it is similar. You can easily close a whole year in the red or even lose money, even with a profitable strategy.
I also recommend that you check out the video from Alexander Gerchik, a Wall Street trader and mentor who has been in this business for over 20 years.
Criticism, thanks and questions in the comments are welcome! :))