TRADING is a solitary pursuit. All that time spent watching the screen can leave traders emotionally tied up in their trading choices. Pride takes over and we can become wedded to a bad trading decision. It takes a lot of discipline to clock your own behaviour when this happens. But fear not, we’ve asked some veteran traders how they navigated their way through this when they started out.
1. DON’T BET THE FARM
One sure-fire way to prevent yourself getting emotionally hung up on your trade is not to bet too much on any single trade. You don’t ever want to risk the mortgage payment or anything else. Mike van Dulken of Accendo Markets says that the first question a trader should ask is “what potential loss can I take on this trade?” Only then should you consider the potential profit. Van Dulken says: “A risk/reward ratio greater than 1:3 is considered good.”
2. BE THE MASTER OF TRADES
Traders literally can’t afford to be a Jack of all trades. They need to be master of a few. Elliott Winner of Capital Spreads says: “Spend time looking at a couple of markets that you will eventually go on to trade. By following only a couple, you are learning the ranges, the market trades and what particular data and news affects that market.”
3. STEP AWAY FROM THE SCREEN
Much like watching the clock at work, sitting in front of your trading screen all day only makes a bad situation worse. David Jones of IG Markets says: “I think one of the best ways to take the stress out of trading is simply not to constantly watch the market. Particularly, if you are trading over hours, days or weeks. The temptation to edit your strategy is too great.”
4. EXECUTE A STRATEGY
Winner says that sticking to a strategy prevents you running a loss-making position on the hope that it will bounce back. He explains: “Decide where you will enter and set your two exit strategies – your stop and limit. City Index’s Joshua Raymond thinks this advice is best paired with the last tip: “The best risk management strategy is just to set your stops and profit target and then walk away.”
5.USE THE TOOLS AT HAND
Every trading system seems to offer stops and limits these days, but many also offer other fancy planning and history applications. These allow traders to learn from their mistakes and put together more robust strategies that are harder to get distracted from.
GFT is hosting an informal seminar
to equip binary beginners with the skills to get started and experienced binary traders to take their strategies to the next level.
David Morrison, GFT’s derivatives market strategist and a City A.M. columnist, will present a talk on:
● What are binaries?
● What influences their pricing?
● What markets does GFT offer?
It will be held at the Grange St. Paul’s Hotel at 8.30am-10am on 9 November 2011. Call GFT on 0808 208 5197 or go to www.gftuk.com for more information.