I thought it would be quite interesting for the more experienced traders to provide some useful insight and advice on what it takes to make it in this business. I know most people could probably right pages on advice that they'd like to give and experiences they had, but I ask you to find just one, the most important element that you believe a trader needs to know in order to be successful.
I will start... for me the most important thing that a new trader should understand is risk. Everyone comes into this business hoping to make money and lots of it, they dream about the upside potential but don't really pay attention to the downsize risk. They hear about brokers offering 100:1 leverage and in some cases much more, they do the maths in their head and realize that by utilizing leverage they could more or less double their account on a daily if not weekly basis. They forget that just as you can double your account extremely quickly you can also lose it in just the same amount of time. Remember just because you can do something, doesn't mean that you should do it.
So my advice to any new trader is to not overexpose yourself, always make sure that you can survive to trade another day. As long as you protect your capital during the down days, the up days will surely come and you will be there to benefit. This is most certainly a business and not a video game and as long as you treat it as such you will have made your first step to making some sort of an income from trading.
Another very important factor to think about when you consider overleveraging your account is the impact that a loss can have on yo mentally. Lets take the example of someone trading a $10,000, if they take a trade of 1 standard lot with a stop 100 pips away they risk losing 10% of their account, thats 10 losses and they are wiped out. I can tell you that this is not a good feeling, and whilst in the trade that person could be compelled to make stupid decisions because they can't bare to take the drawdown.
Now lets look at the example of a person with the same size account but only trades mini lots. A 100 pip loss to them is just 1% of their account, it would take them 100 trades to completely wipe themselves out, it is nothing in the grand scheme of things and hence should they take a loss they wouldn't be so affected not to mention that whilst in the trade itself they won't have that urge to do something stupid because they are not overexposing themselves.
So you see learning about risk is an extremely important lesson that every trader should master because it not affects their ability to manage a trade once they are in it but it also allows them to hang around to trade another day!
I will start... for me the most important thing that a new trader should understand is risk. Everyone comes into this business hoping to make money and lots of it, they dream about the upside potential but don't really pay attention to the downsize risk. They hear about brokers offering 100:1 leverage and in some cases much more, they do the maths in their head and realize that by utilizing leverage they could more or less double their account on a daily if not weekly basis. They forget that just as you can double your account extremely quickly you can also lose it in just the same amount of time. Remember just because you can do something, doesn't mean that you should do it.
So my advice to any new trader is to not overexpose yourself, always make sure that you can survive to trade another day. As long as you protect your capital during the down days, the up days will surely come and you will be there to benefit. This is most certainly a business and not a video game and as long as you treat it as such you will have made your first step to making some sort of an income from trading.
Another very important factor to think about when you consider overleveraging your account is the impact that a loss can have on yo mentally. Lets take the example of someone trading a $10,000, if they take a trade of 1 standard lot with a stop 100 pips away they risk losing 10% of their account, thats 10 losses and they are wiped out. I can tell you that this is not a good feeling, and whilst in the trade that person could be compelled to make stupid decisions because they can't bare to take the drawdown.
Now lets look at the example of a person with the same size account but only trades mini lots. A 100 pip loss to them is just 1% of their account, it would take them 100 trades to completely wipe themselves out, it is nothing in the grand scheme of things and hence should they take a loss they wouldn't be so affected not to mention that whilst in the trade itself they won't have that urge to do something stupid because they are not overexposing themselves.
So you see learning about risk is an extremely important lesson that every trader should master because it not affects their ability to manage a trade once they are in it but it also allows them to hang around to trade another day!