If you are about to start your trading journey, things can be a bit scary for the road between today and your goals (whatever they are) is paved with numerous obstacles.
Ace Gazette can be your guide to overcoming those obstacles and achieving peak performance in trading. But before diving into the muddy waters head first, it is important to you ask yourself the right questions:
Why do you want be a Trader?
When asked this question, often aspiring traders answer about the qualities they have, like “I can stay calm and focused, I can read the market, I enjoy finance and economics, etc…”
However you will not achieve anything without the proper motivation and precise goals.
Why do you want to be a trader for? To have more time for you and your family, to earn more money, to put your money where your mouth is, to be responsible for your actions, to be your own boss instead of going through a performance evaluation each year in which you don't have much say?
The clearer your goals are, the quicker you will absorb what you need to learn to succeed in trading.
Most likely your motivations will be one or several of the followings: more money / more time / more freedom / an intellectual challenge.
Learn to set concrete goals to stay upbeat and focused during the tough times to come.
Trading is simple but not easy. It will challenge you to the point where you will ask yourself: “Should I quit or keep going?” This time will come, and when it comes, you will need to remember why you wanted to become a professional trader in the first place. You need to want it as bad as Oxygen you inhale.
Can you commit enough time?
Time is money. This perfectly applies to trading. Sure, you will read on the internet that all you need to earn money in trading is a few minutes a day, dropping a secret template on your charts that you will buy for a lot of money before realizing it was all smoke and mirrors.
What makes a good trader is his/her ability to read and understand the market and the reasons behind why the price moves.
There is no magical shortcut. If you do not know anything about the markets, it will take time. A lot of time. A huge amount of screen time, until watching charts and reading price become a second nature. You need to develop a trading routine, and developing a routine takes time.
“We are what we repeatedly do. Excellence then, is not an act, but a habit.”
You may develop a habit with just a few minutes a day, but it will take years until you reach excellence. So be aware that your success in trading will depend on the time you are able and ready to commit.
Do you have financial means?
Once you are sure you can commit enough time to start trading, it is time to consider the other essential aspect of the matter: money.
What is your available capital to trade? Is this capital made of money you can afford to lose without putting your life and your family in jeopardy?
You can start trading with very small trading account. I'd strongly recommend start as small as you can. Test your trading skills in live markets without risking any amount you cannot afford to loose. This will reduce the risk while you are getting familiar with the market.
Once you feel more confident and you believe you found your edge (routine that works more often that not, hence guaranteeing you a positive return on investment overall) you will be able to use a bigger capital while constantly thinking about protecting your capital.
There is no minimum or maximum amount needed to trade, but obviously, if your goals are to be financially independent and to live from trading, you will need a capital that enables you to take enough benefits to live on.
If you have no other source of income than trading, a capital of 50.000-75.000$ is the minimum, if and only if you have your edge and managed to gather a significant amount of pips every week or month.
If you plan to start with less, just tell yourself that you will need another source of income until you capitalize enough to make trading your only profession.
You will learn in other articles how risk management precisely works and what size your position could / should be.
Are you a fighter or quitter?
Trading will challenge you to the core. Many times you will find yourself wondering if this activity really is worth the emotional roller coaster it has put you in.
You have to face fear and manage greed. Those two will always be your greatest enemies. It takes time and discipline to master fear and greed.
Being alone in front of your screen, you can feel lonely, isolated, bored, and powerless even when the market crushes your plan, and your dreams with it. You will realize that your goals are on the top of a mountain, far, far away, and way outside your comfort zone.
You will feel the cold ignorance of the market and will be left on your own through some dark times. Just remember, your screen is a mirror and if you are disciplined enough and true to yourself, you will learn to fight fear and greed with a mechanical routine that leaves no room to emotions.
Again and again you’ll be tempted to quit. You will have to decide if you are a fighter or a quitter. If you come to the point where this question has only one answer, the first one, then you’ll have become a professional trader.
Do you have a sound trading plan?
No soldier goes to war without a plan. You are about to fight the market, this is a David versus Goliath situation. You need a plan. A trading plan.
One that will eliminate emotions and gives you on a regular basis a reward greater than the risk.
Where, when and why do I take a trade?
Where, when and why do I exit my position?
What risk I am willing to take, for what reward?
How long am I going to keep the position? A more correct question is where, at which level I'm looking at to close the trade?
Asking right questions and finding correct answers will be the key to your success.
Did you test your trading plan?
Until you find the answers to the questions mentioned in point #5, it is not worth going into battle. It’s like entering the field with holes in your armor, a rusty blade and only one shoe.
You must test your trading plan until it is clear to you that it makes you feel comfortable day in day out. You have to prove your trading plan capable of producing positive results overall. When you sit down in front of your screen with no fear but only confidence in your trading plan, whatever kind of market you have to deal with (trend, range, low volatility) you can prepare your next offensive.
You need to find your edge. This will take time. Test your trading plan on demo account first then on a micro live account to sharpen your sword and polish your shield until you feel ready.
What is risk management?
Risk management is “the forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact”.
At Ace Gazette, we always say that Risk Management is the Holy Grail.
In trading, you do not need to have a success rate of 95% to make money. You first need to evaluate if the reward is your risk worth.
Are you willing to risk 500$ to gain 500$ (where the risk-reward-ratio is 1 to 1) or would you be rather picking opportunities that offer you 1500$ for a risk of 500$ (where the risk-reward-ratio is 1 to 3)? On the long term, the answer is obvious. Higher the possible reward compare to risk undertaken is better. Obviously, we need to be looking for higher reward trading opportunities.
With a success rate of 60% and a favorable risk reward ratio, you can secure some decent earnings.
You will learn more about Risk Management in our course material.
Can you handle the stress?
In all walks of life stress is inevitable. We all experience it in regular basis. Stress levels may vary in line of work you do. We can easily classify trading amongst the highest stressful work. If you cannot handle the stress trading is not for you. Remember, your health is much more important than material gains.
There are plenty resources on the net about ways to handle stress but in trading best way to handle stress knowing what you are doing and avoiding silly mistakes. You need to be able to calculate the outcome before you take a trade and fully accept the outcome in advance whether it'd be, winner or looser. If you cannot accept the outcome regardless it's a winner or looser then don't take the trade.