So why do you want to become a better trader. The obvious reason would be to make more money. For some you might want to become a better trader so you can start making money and stop losing money. Whatever the reason we can all get better. Today we want to share ways that will help you become a better trader. Our list is ranked in order of importance the way we see it.
The Market Engineer Top 7 ways to become a better trader List:
#7 Determine Your Goals
Someone has said that if you aim at nothing you will hit it every time. Everyone needs goals. Whether we are talking about trading or everyday life, you need goals.
In trading your number one goal should be to follow your trading plan or system. Your secondary goal should be how much money you make. How much money you make is dependent on your system. To follow your system you must have confidence in your trading system. If you lack confidence then it will be hard to follow your system. In order to have confidence in your system you must test your system.
#6 Understand Yourself
What is your mind like? The mind of a trader can sabotage that trader. Money can make people irrational. When people lose money they get nervous and sell to quick. When people make money they get happy and sell to quick.
What are some signs that your mind is getting in the way of your trading?
- If you are making decisions based on the way you feel.
- If you are trading because of fear or panic.
Only you will know if you are trading on emotions. It is something you can figure out pretty easy.
#5 Determine What You Will Trade
Some markets thru out history have given very good trends and other markets have not. Just because a market has not had good trends in the past does not mean that it will not trend in the future. If we have historical data and we know that there is a market that does not have good trends historically then why trade it? Trade something that has trended well in the past. To determine what you will trade it is good to do back tests. A back test will help you determine what you need to trade.
#4 Stop Stressing Over Losses
Everyone hates to lose. In trading don’t look back. We learn in life it is good to win and bad to lose. In trading it is different. There will be losses. Every trader needs to understand that. You can’t trade without having losses. We need to learn not to stress over them. A trader needs to learn to follow the system. When you lose money it is just part of the cost of trading.
#3 Determine Your Signals
Some people think that this should be the most important thing in trading. What will trigger your buy signal? It is not as important as some might think. That being said we need to have a way to get into the market. Which signals you use is up to you but stick with what you choose. If you use a moving average crossover then you need to use it on every trade.
#2 Understand the Importance of Volatility
We cannot over state the importance of volatility in trading. You need to understand that every trade is different even if it is in the same market. If you trade AAPL today and trade it again next week the trade is different. The reason is volatility. When you learn to calculate volatility as part of your trading plan then you will become a better trader.
#1 Understand Trading Risk
This is the most important aspect of trading in our opinion. If you ride out losses you will lose a lot of money. You have to put in a stop. Anything over 2% is too much. I don’t care how right you think you are if you lose past 2% you are wrong. This is the quickest way to empty your account.
These are just a few ways that if followed we believe will help you to become a better trader. No list is fully complete. If you have some that you think should be on the list send us an email and we can discuss.