Currency trading is possibly the easiest way to build your stock digital currencies, fast… but it’s also a good way to lose it all if you dive in unprepared. An even bigger risk is when you ‘get lucky’ early on and start to think you’ve got it all worked out…
You start to feel invincible and the temptation is to loosen stops, increase lot sizes and take bigger and bigger risks.
And quite often you’ll get away with it… for a while.
But rest assured that sooner or later, the market has a way of coming back to make you feel very, very human.
The thing is, almost every trader who blows up their account do so after a run of amazing success.
Don’t fall into that trap…
The better things are going, the more important your trading plan and money management become if you don’t want to become another statistic.
Whole books have been written on the psychology of trading and money management, so I won’t try to rehash all that in a single blog post, but I will share a few tips that might save you some pain. If you want ot dig deeper, find yourself a copy of Fooled By Randomness… essential reading for any trader in any market!
A Few Trading Tips To Get You Started…
Trade A Demo Account First. Everyone struggles with this… we all want to go live, especially if we are having some wins… but the process is invaluable as it’s teaching you trading patience.
Trading opportunities are like buses… if you miss one there will always be another one along soon after!
ALWAYS Trade With a Plan. If you don’t know you’re entry, your stop loss and your profit target, don’t take the trade until you do.
ALWAYS Trade With a Stop. It seems like common sense and everyone starts out using them religiously, but they are the first thing to go as your account balance starts to grow.
NEVER Move Your Stop. Decide your maximum risk before you enter any trade, and stick to it. If the trade goes against you, take the loss and move on.
ONLY Trade Funds You Can Afford To Lose. Again, common sense but I’ve seen plenty of people get into trouble charging up their credit cards, especially when they were eager to get back in after blowing up their account.
NEVER Risk More Than 2% Of Your Account On A Single Trade. That way you can sustain a run of 50 losses without blowing up your account.
The Trend Is Your Friend. Trading against the trend is higher risk and usually a sign of impatience. Most people will do better to wait out the retrace and enter in the direction of the trend.
A (Relatively) Simple Beginners Strategy…
If you are new to trading and you’re determined to trade cryptos, it’s safe to say that the long-term trend is LIKELY to be Bullish for most established currencies for the foreseeable future.
So a simple play is to look to buy on dips and hold the position long term…
Keep your lot size small so you can ride out any fluctuations and wait until the market moves well in your favour and then move your stop to a break even point.
Then look for your next entry…
Even with this approach, you want to have a trading context that tells you the trend is indeed up and the market is about to resume moving in that direction. Then you need a firm trading plan that identifies your entry point, your invalidation point (the price where you know you were wrong and it’s time to get out), and a logical profit target.
If any of those don’t mean anything to you, consider working though the following free training package before you risk your money!