As a trader, if you have lost some money in the past, chances are that you will be fearful when opening new trades. This is because you will think that the trade will cost you money.
We went through the same process early in our trading career. After losing our entire account, we spent quite some time before trading. When We started trading again, we was always nervous about the trades that we was opening.
You will also go through this process.
When you are fearful, chances are that you will make ill-informed decisions! For instance, you will spot an opportunity and then be fearful to enter the trade. Also, you could be in a position to take losses before the trade matures.
In this article, we will highlight a few strategies to improve your trading skills.
#1 – A TRADING PLAN
Having a tested trading plan is one way of achieving success as a trader. The trading plan allows you to make well-informed decisions when entering or exiting a trade. You should take a few weeks or months developing and back-testing the plan you want to use in your trading.
This plan should include a number of tools such as technical indicators. Most trading platforms have a strategy tester which you should use to backtest the strategy. By having this plan, you will be at a good position to make informed trading decisions and you will improve your trading skills.
#2 – SPECIALIZING IN A FEW INSTRUMENTS
In trading, you can chose to be a jack of all trades or a specialist in one or two assets. Most people who go for the former strategy end up making huge trading mistakes. The fact is that you would rather be a master trader in one asset than general knowledge on everything.
If you are perfect at trading crude oil only, then you will be at a better position than a person who pretends to understand 10 currencies, stocks, and commodities.
#3 – A MENTOR
Whether you are a new trader trader or an experienced one, you really need to have a mentor that sharps your trading skills.
Warren Buffett has talked about how Benjamin Graham mentored him. He has also talked about how his investment partner, Charlie Munger has helped him make financial decisions.
Billionaire William Ackman has talked about how he derives his inspiration from Warren Buffet. This shows that even you can become a better trader by having a mentor.
This should be someone who has traded for a number of years successful. The benefit of this is that it will help you understand the risks of trading, and this will improve your trading skills also.
#4 – A DAY AT A TIME
As a trader, you need to take a day at a time. This means that you should not use yesterday’s wins in today’s trades.
Maybe you want to bought WTI crude oil yesterday and made good money. The fact is that you will lose money if you take the winnings to today’s trades. Remember that the financial market is a very dynamic one and things change every second.
Therefore, if you lost money yesterday, you should trade as if you didn’t this did not happen. You should trade a day at a time.
#5 – UNDERSTAND THE RISKS
This is very important, You should understand the risks involved in trading.
In this, you need to know that trading is a risky business where you can make a lot of money today and lose everything tomorrow.
When you have a good understanding about the risks, chances are high that you will avoid making the same mistakes and you will improve your trading skills. You will also take it easy when you lose money.
#6 – THE RIGHT LOT SIZE
The lot size you use per trade is very important. The higher the lot size, the higher the risk will be for the trade.
If you have a $10,000 account, you should desist from using a 10 lot size. With this lot size, chances are high that you will lose the entire money within a short period of time. You should accept to make small amounts of money by using a smaller lot size than risk your entire account with a big size.
In addition, you should place a stop loss to the level where you will be comfortable losing the money. For instance, for a $10K account, a stop loss of $100 can be good for you.