Learning to trade: let's get rid of the clichés!
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The route to learning to trade is a long one. Novice traders often have a distorted view of this investment activity and this is what leads them to make many mistakes in their trading. A poor approach to trading often results in loss of capital. Here is a list of trading clichés that will inevitably lead you to disaster.
A large number of novice traders think that they can get rich through trading, that they will change their lives. It's a big mistake to think that. If you approach trading with this idea in mind, you will inevitably lose your capital. There is a big difference between coming to the financial markets to earn money (that's the goal of every trader) and coming to make a fortune.
The psychological impact of your approach to trading is a determining factor. You must not have the wrong objective. Your objectives must always be in line with the size of your capital. The problem is that novices do not think in terms of percentage but in terms of money.
Making €100 in a year with a €1,000 account or making €1,000 with a €10,000 account is the same. In the 2nd case you may have made much more money but your percentage performance is the same in both cases.
Making 10% in the year is good performance. Don’t believe that you can double or triple your capital without effort. Yes, it is possible, but for what level of risk? If you use high leverage, your gains can certainly be tenfold but so can your losses!
So stop believing there is easy money to be made in the financial markets. Trading is not about getting rich but about making your capital grow. It is an investment like any other. Those who promise to make you rich are charlatans, don't fall into the trap!
For many novice traders, the result of opening a trading account is either to raze this trading account or to double their capital. That is not trading. The objective is to gradually increase your trading account each month.
In the meantime, you suffer a lot of losing trades. The important thing is not to have a positive percentage of winning trades, but to be positive at the end of the month. In other words, you need to earn more from your winning trades than you lose with your losing ones.
To achieve this, it is important to manage your trading risk. You must have rigorous stop loss management to limit your losses as much as possible. But first of all, you have to accept losing! The sooner you accept that a trade can be both a winner and a loser, the sooner you will progress in your trading.
Once losing is no longer a problem for you, you can more easily adjust your stop losses and cut your positions with losses. To be a good trader, you must be able to recognize, as soon as possible, when your scenario has a high probability of no longer coming to fruition.
If you lose several trades in a row, it doesn't matter. Money management is there to protect your trading account.
All traders are looking for results in trading but it shouldn’t become an obsession. A good trader is not the one with the highest performance, it is the one who manages to generate the highest performance in relation to a certain level of risk.
All performance must be linked to risk. You must be aware of this. It is better to make 10% in the year with a 2% drawdown than make 50% with a 25% drawdown. In the first case, the tradingstrategy‘s risk/return ratio is 5 (10/2) while it is only 2 (50/25) for the 2nd.
If you look at the so-called "best traders" on social trading platforms (platform such as Etoro or Zulutrade which allow you to copy the other traders’ trades), you will be very surprised. Novice traders are always attracted to performance and only look at this element. This is a huge mistake that often has serious consequences for their trading accounts.
Learning to trade does not happen in a week, or even a month. Learning the basics can be quick, but to be well trained in trading you also need to gain experience. It is this experience that will allow you to ultimately make your trading a success.
Novice traders tend to believe that a simple trading training course or a trading book is going to be enough to make their trading a winner. This is a serious mistake. These learning elements teach you the basics of trading and can give you some ideas to improve your trading, but to get to trading that wins, there is no replacement for work. As Aristotle said, it is habit that makes us good. To become a good trader, you must therefore accumulate trading hours, as a pilot accumulates flying hours.
Cumulating hours enables you to face the different situations that the financial markets may have in store for you. Your mechanisms for taking positions, managing your stop losses and taking profits must have become a habit. Before each trade, you must be prepared to face any situation and therefore anticipate all possible scenarios. This obviously includes losing scenarios.
Yes and No. Trading is open to everyone in the sense that everyone is able to be a winner in their trading. The use of the various trading tools is not complicated, what is hard is to learn to control yourself and to find, not a good strategy, but the strategy adapted to your investor profile.
Where trading is not open to everyone is in terms of capital. Trading is not only for the rich, but also for those with low incomes. If you have trouble putting savings aside each month, don't start trading. The pressure would be difficult to bear and above all you must only invest moneythatyou can lose.
You shouldn’t invest all your savings either, but only part of them! Don't put your future at risk to trade. I often advise people not to invest more than 10% of their savings in trading. The only time you could invest more is if you have a high-performance trading strategy, with controlled risk, that has been tested over at least several months. To put it simply, the only thing that should allow you to exceed this 10% is that your trading is a win-win situation. If it is to replenish a recently razed trading account, it's a very bad idea!
I quote 10% of savings but it is up to you to determine the maximum amount you are willing to lose. You must set this amount before you start learning to trade! Afterwards, you may be tempted by your emotions.
It’s possible to get rich with trading
A large number of novice traders think that they can get rich through trading, that they will change their lives. It's a big mistake to think that. If you approach trading with this idea in mind, you will inevitably lose your capital. There is a big difference between coming to the financial markets to earn money (that's the goal of every trader) and coming to make a fortune.
The psychological impact of your approach to trading is a determining factor. You must not have the wrong objective. Your objectives must always be in line with the size of your capital. The problem is that novices do not think in terms of percentage but in terms of money.
Making €100 in a year with a €1,000 account or making €1,000 with a €10,000 account is the same. In the 2nd case you may have made much more money but your percentage performance is the same in both cases.
Making 10% in the year is good performance. Don’t believe that you can double or triple your capital without effort. Yes, it is possible, but for what level of risk? If you use high leverage, your gains can certainly be tenfold but so can your losses!
So stop believing there is easy money to be made in the financial markets. Trading is not about getting rich but about making your capital grow. It is an investment like any other. Those who promise to make you rich are charlatans, don't fall into the trap!
Trading, it’s double or quits
For many novice traders, the result of opening a trading account is either to raze this trading account or to double their capital. That is not trading. The objective is to gradually increase your trading account each month.
In the meantime, you suffer a lot of losing trades. The important thing is not to have a positive percentage of winning trades, but to be positive at the end of the month. In other words, you need to earn more from your winning trades than you lose with your losing ones.
To achieve this, it is important to manage your trading risk. You must have rigorous stop loss management to limit your losses as much as possible. But first of all, you have to accept losing! The sooner you accept that a trade can be both a winner and a loser, the sooner you will progress in your trading.
Once losing is no longer a problem for you, you can more easily adjust your stop losses and cut your positions with losses. To be a good trader, you must be able to recognize, as soon as possible, when your scenario has a high probability of no longer coming to fruition.
If you lose several trades in a row, it doesn't matter. Money management is there to protect your trading account.
The best trader is the one with the highest performance levels
All traders are looking for results in trading but it shouldn’t become an obsession. A good trader is not the one with the highest performance, it is the one who manages to generate the highest performance in relation to a certain level of risk.
All performance must be linked to risk. You must be aware of this. It is better to make 10% in the year with a 2% drawdown than make 50% with a 25% drawdown. In the first case, the tradingstrategy‘s risk/return ratio is 5 (10/2) while it is only 2 (50/25) for the 2nd.
If you look at the so-called "best traders" on social trading platforms (platform such as Etoro or Zulutrade which allow you to copy the other traders’ trades), you will be very surprised. Novice traders are always attracted to performance and only look at this element. This is a huge mistake that often has serious consequences for their trading accounts.
Trading can be learned quickly
Learning to trade does not happen in a week, or even a month. Learning the basics can be quick, but to be well trained in trading you also need to gain experience. It is this experience that will allow you to ultimately make your trading a success.
Novice traders tend to believe that a simple trading training course or a trading book is going to be enough to make their trading a winner. This is a serious mistake. These learning elements teach you the basics of trading and can give you some ideas to improve your trading, but to get to trading that wins, there is no replacement for work. As Aristotle said, it is habit that makes us good. To become a good trader, you must therefore accumulate trading hours, as a pilot accumulates flying hours.
Cumulating hours enables you to face the different situations that the financial markets may have in store for you. Your mechanisms for taking positions, managing your stop losses and taking profits must have become a habit. Before each trade, you must be prepared to face any situation and therefore anticipate all possible scenarios. This obviously includes losing scenarios.
Trading is open to everyone
Yes and No. Trading is open to everyone in the sense that everyone is able to be a winner in their trading. The use of the various trading tools is not complicated, what is hard is to learn to control yourself and to find, not a good strategy, but the strategy adapted to your investor profile.
Where trading is not open to everyone is in terms of capital. Trading is not only for the rich, but also for those with low incomes. If you have trouble putting savings aside each month, don't start trading. The pressure would be difficult to bear and above all you must only invest moneythatyou can lose.
You shouldn’t invest all your savings either, but only part of them! Don't put your future at risk to trade. I often advise people not to invest more than 10% of their savings in trading. The only time you could invest more is if you have a high-performance trading strategy, with controlled risk, that has been tested over at least several months. To put it simply, the only thing that should allow you to exceed this 10% is that your trading is a win-win situation. If it is to replenish a recently razed trading account, it's a very bad idea!
I quote 10% of savings but it is up to you to determine the maximum amount you are willing to lose. You must set this amount before you start learning to trade! Afterwards, you may be tempted by your emotions.
