Here are the first and most important lessons that a new trader needs to understand. All traders have to learn these lessons either the easy way and learn them from others or they can learn them the hard way by losing their own money.
- Do not start trading until you have a quantified trading system with and edge.
- Trade your system with consistency and discipline over the long term with perseverance.
- Every trade should have a good risk/reward ratio on entry. Your stop loss versus your profit target should give you the chance to make $300 for every $100 you risk.
- Always go in the direction of least resistance for your trade. Stay on the side of the trend for your timeframe.
- Trade position sizes to bring your risk of ruin down to close to zero.
Profitable trading is built on the principles of math and psychology that work over the long term not opinions, predictions, ego, and luck.
“If you diversify, control your risk, and go with the trend, it just has to work.” – Larry Hite.