Sometimes the human brain just doesn’t work the way we’d like it to. Unfortunately, there are a lot of variables that control our emotions, and thus our overall performance. That is why our efficiency varies so greatly across the board. However, we can all get better by continuously striving to fix our short-comings.
When you’ve improved upon most of your big weaknesses, your performance will automatically increase. Today we are going to talk about the trading business. The following 4 tips will be helpful for you to understand how to become a more calculated, intelligent, and profitable trader.
1. Continuously monitor your performance
Traders need to be efficient. And, alongside being an efficient performer, you have to monitor your work. Otherwise, how are you going to know whether the trading is going down the right or wrong path? Great traders pride themselves on data, and constantly analyse that data to be the best they can be.
You need to do this for the sake of your own improvement. If you improve your trading performance, you make more money. It’s a win-win situation all round. And the good thing is, there is a trick to help you understand your performance. It’s called the risk to profit ratio (video below) and it is used for what you are putting into your trades, and what is your expectation from them. So, use that tool for monitoring.
2. Avoid Over-trading
Psychology plays a great role in the outcome of your every trade. Many Singaporean traders often take a course on trading psychology to develop a stable mindset in CFD trading. If you are always under stress it’s very obvious you will be over-trading the market to make more money. But does over-trading really help?
Over-trading is one of the key reason for which you are increasing your stress. Start with a written plan so that you know your objectives. Walking into the investment industry without having a specific mindset will never help you to become a successful trader. Know your goals and you will be able to design your strategy. And always have some financial backup as a currency trader as it reduces the stress.
3. Don’t spend more than you can afford to lose
Here liquid money is basically the whole investment you have put into your trading account. Although we are not going to suggest you put every bit of your money into trades. We would tell you to keep some backup in case anything happens to the main capital you are trading with.
Then you also have to make a plan with the main trading money. And the most efficient plan is risking a very small amount of investment in every trades. This plan is effective mostly for the novice traders, as they tend to lose trades more than any others. So, you have got to try this plan out for your trades.
4. Sleep on it
This is the most important thing to remember in money management of trading. This test helps you to understand whether you are happy with the trade you have just placed. And whether you are happy with the amount of money invested into your trades. First of all, you should not execute small term trades because they will make your brain very busy, and that is not good for any trader in the world.
Start with long term trades like the swing trades. And then you should test out whether your brain is alright with the position of a particular trade or not. In a simple word that is called the ‘sleep test’ in this business, where you basically “sleep on it” and let your brain digest the risk versus reward of a particular trade you’re considering. This helps a trader to make the most efficient trades.
Trading isn’t for the feint of heart. It requires a certain level of measured aggression. Not everyone can be an effective trader due to lack of financial intelligence, because they’re too naturally impulsive, or any number of other reasons. Make sure you start out slow, take your time getting to know the markets, and don’t make any trades based on gut instinct until you know the market inside and out.