THINGS EVERY TRADER SHOULD KNOW AND APPLY - 10% to @Tron-Fan-Cub

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Hello everyone and welcome to my blog.

We all know that trading is a thing of the mind and as much affects our emotions which normally leads to hasty and unwise decision making.

This emotional takeover is what normally lead most traders even good ones into making unnecessary losses which is what brought about the popular saying that says "a good trading psychology guantees 70% success in trading".

If that is true which is believe it is, then it will be unwise if we do not pay close attention to how traders can maintain a good trading psychology and that is what has led me into making this post where I will be explaining some things traders should do or avoid in other to maintain a good trading result.

No matter the level of the technical and fundamental analysis knowledge of a trader, if he doesn't have a good trade management and psychology, he won't be profitable and it will be only a matter of time before he quites trading due to uncontrollable losses.

Some of the things that lead traders into accumulating losses includes;

• INAPPROPRIATE SETTING OF STOP-LOSSES

There's no doubt scalpers who trade using mostly leading indicators are mostly known for using tight stop-losses but some traders overdo this by inappropriately setting their stop-losses thus making it too tight which eventually leads to price smashing it before making a proper move on their right side.

• Example

The above screenshot is an example of how a day trader should properly set a stop-loss. Looking at the above you will see that a simple analysis was carried out which included spotting a divergence and a breakout above a bearish trend. After the breakout the next thing to do is to take a buy position.

Some traders who do the mistake of making their stop-loss very tight to the point that the price will probably hit it will retesting the breakout position. But knowing where to set your stop-loss will save you from making losses even when your analysis is correct.

• See below

From the above we will see that the analysis was correct but the price came retesting the breakout position which is something we should always expect but for the fact that the stop-loss was set below the breakout candle, saved me from making unnecessary loss.

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• TRADING WITHOUT FINDING CONFLUENCES

Trading without finding confluences is another mistakes traders make while trading and this leads them into falling for false breakouts and false reversals.

• Example

From the above screenshot we will see that the price broke above the 21-SMA which serves as a dynamic resistance to the bearish trend. A trader who trades without finding confluences would have easily fallen for the false breakout.

• See below

Looking at the RSI for confluence we will see that at the initial breakout above the 21-SMA there was no divergence which indicates a loss in bearish momentum meaning that the price is more likely to continue downwards which it did. But observing the actual breakout, we will see that the RSI actually formed a divergence which indicates a loss in bearish momentum thus serving as confluence for the breakout above the 21-SMA.

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• PROPER RISK MANAGEMENT

This is very crucial for every trader as it helps to enforce decipline. When I talk about risk management, I mean setting up rules for yourself such as making it a rule to always risk only 1% or 2% percent of your trading capital on every trade.

Traders without such rules ends up trading and risking clearlessly and as we all know, there's no strategy that is 100 percent effective which means that in some trades you must make losses and without proper risk management, a trader might end up losing more than he can afford to bear.

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• AVOID OVER TRADING

Over trading is also one of the common mistakes traders do make and it normally comes as a result of greed or regarding trading as fun instead of a serious bussines.

In as much as one should develop love and passion for their respective careers with trading not being an exception, sitting in front of your computer and starring at your charts all day while making multiple entries will eventually make a trader to lose control over their analysis or jeopidize their risk management.

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• AVOID REVENGE TRADING

Revenge trading is another thing that leads to making unbearable losses. Sometimes we tend to loss a trade due to factors we can't explain or miscalculations but what separate a good trader from a bad one is their ability to accept losses.

A good trader with good trade management will easily accept losses and move on while a bad trader would want to recover back whatever it is that he just lost on a trade which will eventually lead him into trading uncontrollable emotions thus making him lose even more.

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• OVER CONFIDENCE

When a trader gets over confident, the trader tends to trade without risk management and that's very bad. This normally leads to accumulating losses and once losses are currently being made, the trade would immediately regret his actions and decides to wait for the price to come back to the entry position for him to exit the trade and before you know it, it's either the trader had already made unbearable losses all the entire position has been liquidated.

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The above and some other factors which includes trading while angry or emotionally unstable, multi-tasking, rushing to catch up with some other things, etc. Can easily lead a trader into making unnecessary losses despite having good knowledge in technical and fundament analysis.

Thanks for reading..