Risk Management
Stringent risk management parameters are in place to keep your trading edge profitable and keep you fighting another day; small risk-per-trade, overall account management, sticking to stop losses, and so on are part of your trading wisdom.
Risk management is a sure-fire way to significantly reduce the stress that trading can cause, allowing for more objective decision-making.
Trade too small than too big
It is best to find a happy medium in which your trading size is large enough to allow you to make substantial profits and keep you engaged in the trading process, but not so large that it interferes with your ability to maintain objectivity and discipline, and, of course, puts you at risk of a catastrophic loss. Remember that everyone has a different risk tolerance – trade with the risk that you are comfortable with.
No position is a position
On the sidelines is often the best place to be. This one gets lost in the shuffle because either the temptation to trade becomes too strong or it feels as if you are not doing your job as a trader by, well, trading. However, a disproportionate amount of time should be spent doing nothing rather than doing something.
You will find Good Trades
Staying focused and conducting research is important, but it shouldn’t be difficult to find opportunities that fit into your game plan.
It is preferable to under-trade rather than over-trade. Forcing the issue results in unnecessary losses, frustration, and, eventually, more errors.
Because of volatility cycles, opportunities tend to appear in clusters, so you may be busy one minute and then not the next. Stick to your trading plan, and everything should fall into place. Should you don’t already have a trading strategy, make one now.
If all else fails, remain out
In case you’re not feeling it, leave and come back later. Determine the source of your apprehension when trading.
Often, it’s simply because there aren’t any high-quality trading opportunities available at the moment, but it could be something more serious. Perhaps you are gripped by loss aversion or another emotional state.
Misfortunes are essential for the game
Some people may find it difficult to accept this one. In general, we dislike losing.
Another trading wisdom is to remember that profitable trading isn’t about always being right; it’s about making more money when you’re right versus losing money when you’re wrong.
Just keep in mind that even the best of the best suffer many losses during their careers, and they actually take pride in their ability to accept defeat and move on.
Recoil your watchlist
It’s a good idea to keep your world as small as possible while not limiting yourself. Everyone has a sweet spot. Find what works for you and don’t feel obligated to watch and trade everything just because it’s available.
Regularly make a stride back
Take days off; don’t skip a vacation because you’re afraid the markets will move without you. They will be waiting for you when you return.
It’s great trading wisdom to take short breaks to recharge your batteries and review your trading activity on a regular basis. This can help you stay on track and improve your performance. If trading becomes difficult, walk away and return another day.
Make a trading strategy.
Everyone should have some kind of plan. You won’t get very far if you shoot from the hip. You don’t have to write a 50-page business plan, but you should have a framework to work within that includes enough detail to answer all of the important questions.
Even inexperienced traders can begin with a concrete risk management strategy enhancing their trading wisdom.
Suggested Read: How Teenagers Feel Unprepared….
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