The quality of your trading experience largely depends on your approach. Many newcomers tend to consume numerous online articles about various trading strategies or watch an endless stream of YouTube videos discussing trading tactics. Engaging in this manner exposes you to a multitude of indicators and patterns, potentially making your trading journey more challenging. To achieve success in trading, you actually only need to be proficient with a handful of indicators. To simplify and enhance your trading experience, it’s crucial to concentrate on just two or three indicators. Identify those you believe you’ve grasped thoroughly, conduct backtesting, and once you’ve mastered their use, consistently apply them in your trading endeavors.
To make money in the financial markets, you don’t need to be well-versed in a multitude of strategies; instead, you can focus on one effective and straightforward strategy and apply it again and again. Irrespective of the strategy you choose, it’s vital to adhere to the following principles in order to remain in the game:
- Maintain Discipline: Regardless of the strategy you employ, adhere to its predefined rules. Avoid the temptation to deviate from these rules if the market moves in opposite direction.
- Cut your losses early: This is very, very, very, very important (this is not a typo). It’s important to cut your losses early in your trades in the event market moves in opposite direction. The likelihood of a losing trade turning around in your favor is rare. Hoping for a reversal is a common mistake made by many traders. Instead, promptly cut your losses and proceed to the next trading opportunity.
- Capital Protection: Safeguarding your capital is your prime responsibility as a trader. You must have capital to remain in the game. Set daily loss limits for yourself. If you reach your pre-established loss threshold within a day, refrain from further trading for rest of the day. Take the time to analyze what went wrong and return to trading after gaining insights. More effective is to set a weekly loss limit. Remember that overtrading is never a good idea; you only need two to three profitable trades per week to grow your account.
If you’re entirely new to trading, it’s advisable to start by using a virtual account. Nowadays, nearly all online brokers offer the option of a virtual account. You don’t have to credit any real money in to this account. This approach offers the most effective means to gain experience and test your strategies in real-market conditions using virtual funds.
Below are few simple yet effective strategies to get you started.
- SMA – Simple Moving Average
- Bollinger Bands
- Gap Trading