Post
Topic
Board Beginners & Help
Re: Tip for making profit in trading for beginners
by
Diacris
on 27/09/2018, 21:01:59 UTC
Since this post is about trading tips, here's a few that will save noobies a lot of money.

  • Risk 1% of your total capital or less - Harder to make tons of money when you have a small capital. Risking only 1% you'll make money way slower, but making a bit of money is always better than making huge donations to broker.
  • Don't overtrade. You'll likely need to take only a few trades occasionally to hit a minimum target of 5-10% capital gain per month, which if you compound your interest, your outcome will be huge after 3-4 years. You don't have to always be in a position just for the sake of making or losing. Only trade in under certain circumstances you decide to use (after you backtested those requirements, of course!).
  • You'll often hear "don't use your own money, begin paper trading" which is a bad advice since you won't have any skin in the game by doing so, and most important skills in trading are psychology-related skills. Whenever you trade, your emotions get triggered by the amount of money you risk when trading and they are influenced by your financial background. Are you poor and trade with your life savings? You'll definitely get attached to your sum of money and get distracted by your own emotions if you risk more than you're willing to lose, stick to my first rule to dodge this psychological barrier.

Here's an example of trade with a Risk/Reward of 1.9

https://imgur.com/a/IQlDaF9

Let's say your total capital is $100.000

The risk this swing trade has is 18.86%

So the amount of capital that must be used to only risk 1% of total capital in case the trade is lost should be 1/18.86 * total capital, which is 5.3% of $100.000 => You only use $5300. If this trade goes wrong, you only lose $1000 (1% of $100.000). But if it's a successful trade, you'll win 1.9 * 1000 = $1900. Basically, you risk $1000 to make $1900.