Newbies guide to trading safely

Here are five basic tips to help every beginner trader:

1. Start a journal

From the very beginning of your journey, you should make notes, whether that is digitally or in a notebook. This will allow you to look back, find patterns in your behaviour and other key aspects (think emotions, time of day, screen time ect). Your journal should be clear and direct, easy to understand, and should be completed with every trade.

2. Trading Plan

Create, edit and adapt a plan. You’ll want to understand the basics, and in doing so, generate a plan that you will stick too. Sticking to a plan is essential. This will allow you to make notes in your journal easier, allow you to adjust quicker, and lastly, help you to identify problems sooner.

3. Protect your capital

Trading is not so much about your wins, as it is about reducing your losses. It is easy to get sucked into future gains and making big money, but if you can not learn to cut losing trades quickly, and preserve your capital, you will quickly lose any profit you have made.

4. Prepare to lose

If the thought of losing trade after trade for hours, days or even weeks is haunting before you start, then it will be a major issue when it happens. Learn to accept the fact that you will not be right all the time. Those that can own up and move on from their losers, will make it much further.

5. Stop-Loss

A stop-loss helps preserve capital. It is essential for beginners. Here is what Investopedia.com has to say — .

“A stop-loss is a predetermined amount of risk that a trader is willing to accept with each trade. The stop loss can be a dollar amount or percentage, but either way, it limits the trader’s exposure during a trade. Using a stop loss can take some of the stress out of trading since we know that we will only lose X amount on any given trade.

Not having a stop loss is bad practice, even if it leads to a winning trade. Exiting with a stop loss, and therefore having a losing trade, is still good trading if it falls within the trading plan’s rules. The ideal is to exit all trades with a profit, but that is not realistic. Using a protective stop loss helps ensure that losses and risks are limited.”

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