There is a big difference between successful traders and amateur traders. Successful traders know how to allocate capital, calculate their risks, and move on after losing money. As someone who has traded for many years, I have come into contact with many people who want to be successful traders. In this article, I will highlight five trading advices that amateurs should follow and how the pros get them right.
#1 – DISTRACTIONS
The first thing I have seen with very many amateurs is distractions. Quite often, you will meet a trader with so many browsers open. They will often be in Facebook, Twitter, or Instagram while still trading. Others will have their favorite blogs open so they can read and comment on the latest stories. Others will have loud music in the background. On the other hand, pros are different. They understand that trading is a profession just like any other. When trading, you will find them focusing on charts and the sources of trading information. If they are on social media, they will be in places where they can get trading news to help them strategize. They will only have relevant television channels open and no music in the background. In addition, if they have a home office, the door during a trading session will always remain closed.
#2 – TIME WASTING
Amateur traders waste a lot of time which could be saved if measures are put in place. For instance, an amateur will spend hours in charts before making a trading decision. They will analyze charts, scan the news, and do other things before opening the trade. They also spend a lot of time looking at different assets. A professional trader on the other hand has a trading plan at hand. The plan tells him what to do and when to do it. It tells him the conditions that should be met before a trade is open. If the conditions are met, the trader will then open a trade, set the stop losses and the take profit and leave the trading room.
#3 – PANIC WHEN MONEY IS LOST
No one loves losses. Losses are very bad such that many people have committed suicide or gotten depression after making losses. However, as a trader, you will often make losses. Amateur traders will panic and get depressed after making losses. On the other hand, a professional trader will always take losses in a positive manner. This is because they calculate the maximum amount of money that they can lose in a trade. The pro calculates the maximum amount of money they can lose and then places a stop loss. The stop less enables them to lose only a small portion of their funds. They also put in place a take profit which helps them stop the trade once a certain level is reached.
#4 – OVERCONFIDENCE
Most amateur traders are overconfident after making a few profits. They make these profits despite the fact that they don’t know much about trading. They open trades, (mostly with a big lot size) and then make a huge profit and then assume that they are pro traders. Professionals on the other hand understand that trading is not the same as gambling. They understand that it is possible to lose the entire amount of money within minutes. Therefore, they take trading slow and know that overconfidence can ruin their trading career.
#5 – INTROSPECTION
An amateur trader will open and close trades without doing any introspection. They don’t take time to record their trades and reflect after the close of the trading day. Pro traders on the other hand are more coordinated. They take time to record the reason for buying or selling an instrument. By doing this, they are able to identify mistakes and opportunities in their trading. In addition, after a trading day, they take time to reflect about their trading. If there made losses during the day, they reflect and identify their mistakes.