With somewhere between 80% to 90% of traders losing money consistently in the long term and most new traders not even making it through the first year I thought ten tips on survival may help some of my new blog readers be in the markets this time next year. I have seen so many come and go over the years it is amazing, some new traders send one e-mail then when they realize it is work to trade they move on quickly. Others want the magic formula to success and think that rich traders are all holding back that they have the “Holy Grail” in the safe but won’t share. The truth is trading is like being an entrepreneur, taking risks, being rewarded when right, losing money when wrong. Profits come from the traders that lose money so you have to be on the right side at the right time to make money in the markets.
New Traders Survival Guide For The First Year:
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Focus on building your initial capital first, not going for big risk home run plays, you will lose money fast, add to your capital as you go, and grow it while you learn.
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Never lose more than 1% of your trading capital on any one trade. If this is not worth your trouble then you need to build your capital up before you continue. (This refers to where to place stop losses NOT to trade with only 1% of your capital).
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Do not attempt to trade futures or options unless you fully understand how they work.
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DO NOT trade illiquid markets in penny stocks, options, or even some stocks or futures the bid/ask spreads will devour your account only the market makers win in illiquid markets.
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DO NOT use any service to learn to trade unless you talk to many people you trust that service and will endorse it.
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Find experienced traders to learn from whether in real life or social media, just watch how they operate and ask good questions, but don’t bother them too much.
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DO NOT even attempt to trade until you have a trading plan with a method that has a systematic approach.
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If you do not understand the probability of your risk of ruin 100% based on your amount of risk exposure per trade do not trade until you do.
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Take all the time you need to get educated in trading before you ever place your first trade. If you have not put in some serious time reading good trading books and using all the fast free resources available online you should not trade any real money until you do.
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Set specific goals with a timeline you are hoping to achieve so you know where you are trying to go with trading. Be realistic but stretch yourself. It is not about making money at first it is about work and effort to get you to that money.