Imagine you have a good business idea.
You know one.
It may come from a mentor, a social media expert, or a distinct group of signals. Rather, it may be the result of hours of analysis.
The signs seem to line up, and you are confident that you have got the discipline necessary to execute your trading plan.
You take the deal and execute it to the best of your abilities.
You lose the trade.
What’s up with that?!
Here are common trading rules that you may have missed that killed your “good” trading idea:
1. Make advance trade preparations
As in any high-performance endeavor, preparation is half the battle in trading. You have to do your homework even before you submit your applications.
- Why does your trade idea make sense today?
- What could change his odds?
- What is the best scenario? Worst case scenario?
- Have you reviewed the previous price movement of the asset?
- Have you identified technical levels that may act as support and resistance?
- Have you included market themes and data releases that may impact demand for the asset?
Taking on a “good” trade idea without making the necessary preparations before the trade is like using a regular Poké Ball and expecting to catch a rare, high-level Pokémon.
You may be lucky, but your chances of success are often unclear from the beginning.
2. Never risk more than you can afford to lose
You’d be surprised how often this “generic” business logic gets thrown out the window.
In some cases, a strong recommendation from trading Teacher Or bad condition FOMO On volatile assets *cough* Bitcoin *cough* is all it takes to ignore months of discipline in favor of chasing massive profits.
But the rule is there for a reason.
If you are risking more than you can afford to lose, you will likely focus on your profits (or losses) rather than execution.
Without good execution, your “good” trading idea becomes just another trading idea that can flood your trading account.
3. Go beyond your previous trades
You are not giving your “good” trading idea the best chances if you are still thinking about issues from previous trades.
Let’s say the USD/JPY pair is in an uptrend and you know you need to expand on it to maximize your profits. The problem is that your last trade was a short position on USD/JPY and you closed at a loss.
Since you are still considering your last trade, you hesitate to add another buy trade for USD/JPY even though your trading plan requires it. Alternatively, you can add a lot to get quick “revenge” for your losing trade.
Just as you need to eliminate issues from past relationships to give new ones a chance, you also need to approach each business idea individually so you can be objective in maximizing your opportunities.
4. Treat trading as a business
One of the problems with having a really “good” business idea stuck in your head is that it can overpower your business sense.
But you have to remember that all business ideas are part of your business.
No matter how successful your trading idea is, it should undergo pre-trade analyses, have a reasonable allocation relative to your portfolio, and should be in your trading journal.
Most importantly, you must manage your capital at all times during its implementation.
Your first task as a trader is not to lose your money. If you treat every trade as part of your job, you will have better chances of trading long enough to get more “good” trade ideas.