“A man who does not plan long ahead will find trouble at his door.” ― Confucius, Chinese philosopher
If you plan on trading or have already started without a plan, know that your assets are at risk. These steps can set you to become a successful trader while maximizing your profits.
Before becoming a trader or an investor, one must create a trading plan; so here are twelve steps to help you prepare:
1. Got Skills? Get some!
How do you know you are ready? Have you tested your trading plan on paper? Are you ready to follow your signals? The pros are ready to make money through the mistakes made by rookies. Don’t give them your money.
Any professional trader and/or investor will tell you how profoundly important it is to study before trading and/or investing appropriately. Another thing they would tell you is that it does not happen overnight, you cannot learn how to trade with just a couple of Youtube videos, although they are great tools.
You must invest time in learning.
Having a great knowledge base can help to keep your emotions in place, and believe me you will need it.
Knowledge produces confidence.
Learning about trading is essential, putting it into practice is just as vital. There are many trading simulator platforms, even for cryptos, which you can practice with fake money. If you are truly a beginner you should give it a try, the only problem is that it practices with fake money, and when it comes to trading, trading with real money sets your mind and your emotions at a different place.
So at the same time, it is helpful, it is also unrealistic to what really happens with your emotions when your trading your real money..
So it´s okay to use simulator platforms for a while to get the very basics, but nothing can substitute trading with real money, even if you start with little. Keep in mind that this is not a get rich quick game as portrayed out there, but a real business, a real career, that requires money to make money just as any other enterprise.
3. Trading Psychology / Mental Prep
How you feel is a great deal on this journey. In case you´re not ready to psychologically handle the market, your emotions will suffer, and you will risk losing everything.
You must be aware of how you react when you’re losing money and when you’re gaining a lot. If you panic you might lose everything, if you´re feeling invincible, you might lose everything.
You must study ways to manage your emotions, and how to place your mindset in the right place, and learn to trade as rationally as possible.
“Expect the best, prepare for the worst.”
4. Take an Investor’s risk profile test
This should be one of the first things you do before you invest in anything! This test will show you how tolerant you are of risks, and help you invest in assets that will allow you to sleep at night.
5. Establishing risk levels
Do you know how much of your portfolio you are willing to trade in one shot? The answer to this is dependent on your trading style and your investor´s risk profile as seen previously, which will show you what your personality can handle.
Once you know set risk levels you are willing to take and stick to them.
6. Establish Goals
How much are you expecting to make? Realistically set earning/profit marks (risk/reward). What is the minimum you will accept to make? You should set weekly, monthly and annual goals.
7. Do your homework
Your job outside of your market is to check the market worldwide, checking overseas markets, index futures such as Nasdaq 100, S&P500, Exchange-traded funds whether it is up or down in the pre-market.
Learn about the advantages and disadvantages of trading before and after big events; although most experienced traders prefer waiting after not to take avoidable risks.
8. Establish Exits
Unfortunately, most traders make the rookie mistake of focusing most of their time looking for buy-signals instead of giving meticulous attention to when or where to exit. Before you enter the market always know where your exits are, there are at least two for each trade. Make sure to have stop losses for when the market goes against you, and remember mental stop losses do not count. Also, have a profit target.
9. Establish Entries
Although entries are important, they are not nearly as important as exits, but you must plan for entries as well.
This is what it would look like: “If signal A fires, and there is a minimum target at least three times as great as my stop loss, and we are at support, then buy X contracts or shares here.” (Example via Investopedia.com)
You see, computers do a much better job than humans in trading, they do not have to feel anything to make a trade all they have to do is meet the set conditions and fire! So make good use of them when it comes to entries, exits, stop-loss etc.…do not just rely on yourself.
10. Keep good records and reports
To be a good trader, you must know how to keep good records. When you win or lose, write down when, why, and how it happened to keep you from making future mistakes, or even to help you prepare to make more profits.
11. Postmortem documentation
At the completion of each trading day, analyze and determine your profits and losses along with your reports. Write down all your conclusions for future reference as well.
12. Find a Mentor
This is probably one of the hardest parts, although you might get lucky in finding a mentor in your local trading groups.
There are many local groups that meet regularly with experienced traders and investors, which you should join and if possible even connect with a mentor.
Also, there are online groups, where you could meet great traders, but it is important you keep in mind that mentorship is a relationship; therefore you can’t force a connection. You must place yourself under mentorship with someone you truly connect with, even if it is a paid service.
In case you cannot find a mentor in any of the scenarios above, finding a trading mentor using paid services might be the way to go.
All you have to do now is elaborate each step, personalize according to your trading style, life style, and your investor´s risk profile. With these tips, you will be set to make the best of your tradings.
I hope this was helpful, and if it was let us know in the comments. Or leave your tips for other traders getting started in their trading plan. And do not forget to share because sharing is caring!
We wish you the best of tradings,
Disclaimer: Our team works hard to bring you the best content in the cryptocurrency market, but it is only our point of view and not legal advice, and may be divergent from other opinions, so please do not make any decisions without concluding studies of your own to understand the profit possibilities and uncertainties involved at your own risk.