The following is a compressed version of what I have learned in the first 9 months as a trader. This will be nothing new to some people, but it is gold for newbies. (In my opinion)
1) Money Management is everything. It allows you to be wrong. It allows you to survive getting in too late, or too early.
2) Smaller time frames are dangerous. 4 hour charts and above are like looking down from a skyscraper. I think of it this way: As I am on the ground, (same as 5 min. chart) I can only focus on the immediate block or two. As I am 100 floors up, (same as 4 hr or above) I can see the whole picture. What was happening on that street isn't significant in the big picture.
If you ever doubt what I just said, just look at the 4 hour chart. Look at the daily chart. Nice and smooth (99%) of the time. Longer time frame trends don't change every time the wind blows. On the other hand, the 5 min chart is chaos in comparison.
Smaller time frames are great for entries. But otherwise they cause heartburn.
With proper Money management, any time frame is manageable. The fact is, we are here to make money, and have some free time. It IS OK to play at 10 cents a pip if you have to. Don't fear a 40 pip loss, as long as you aren't risking more than 2% of your account, 40 is just a number.
A 7 pip loss at $10 a pip is another thing entirely. (Assuming you are new, and account is small.) And 7 pips doesn't mean you were wrong, and in fact, 7 pips doesn't mean anything.
3) Trading is cheaper on longer time frames. While I go long on a 4 hour chart, you may go long 3 or 4 times. Even on a 2 pip spread, you still have thrown away 6 pips. At the same time, I have gained more pips than you, and only payed 2 pips for it. (I assume that you have to get out and miss a FEW pips here and there to make those trades.)
And more importantly, I also can go have a life. You are glued to the screen in a 5 or 15 min. time frame.
4) Another plus to longer time frames, I am not here to screw up a trade. My favorite trade involved me buying EUR/USD, setting stops, going to the bar and drinking for a few hours with friends. I came home to a winner. THAT is why we started doing this. Don't ever forget that. FREEDOM IS WORTH MORE THAN TRADING.
5) This forum has a lot of wisdom in it. LISTEN to the regulars. It is ok to test strategies, but the real gold here is in the basics, money management, psychology, etc. Merlin, Jacko, and so many others are doing well. I however, don't see the same thing on the same chart. My system will ultimately do better for me than theirs, and vice versa.
6) It is ok to have a loser.
7) Psychology is about 80% of this game. When you are demo trading, it is so much easier to see different levels. That in itself is proof. If you are nervous, then you are playing with "scared money", and that money gets hurt more often than not. Scared money cannot see the forest through the trees. Scared money jumps out at -10 pips.
8) Only a few things actually are reliable. Moving averages are indicators of trend. But not everyone is using the 15, 20, or even the 600. Trend lines however, are obvious, and everyone has them drawn on their charts.
9) Listen and trust yourself on decisions. You are the only one who has something to lose on your trades. Listening to others can be dangerous, as they see things differently than you do. (This refers to decision on taking a trade.)
10) If you are still reading various forums and looking for the "Holy Grail", even after reading it doesn't exist.... you are not ready to advance your trading to the next level.
11) Learning your way in this game takes time. If you are here to get rich quick, you are going to give all of your money away. $250 accounts don't turn into millions at the end of the year.
12) Far too many new traders will never listen to any of these points. About 95%. Strange really, as that is roughly the same amount of traders that will fail in the end.
1) Money Management is everything. It allows you to be wrong. It allows you to survive getting in too late, or too early.
2) Smaller time frames are dangerous. 4 hour charts and above are like looking down from a skyscraper. I think of it this way: As I am on the ground, (same as 5 min. chart) I can only focus on the immediate block or two. As I am 100 floors up, (same as 4 hr or above) I can see the whole picture. What was happening on that street isn't significant in the big picture.
If you ever doubt what I just said, just look at the 4 hour chart. Look at the daily chart. Nice and smooth (99%) of the time. Longer time frame trends don't change every time the wind blows. On the other hand, the 5 min chart is chaos in comparison.
Smaller time frames are great for entries. But otherwise they cause heartburn.
With proper Money management, any time frame is manageable. The fact is, we are here to make money, and have some free time. It IS OK to play at 10 cents a pip if you have to. Don't fear a 40 pip loss, as long as you aren't risking more than 2% of your account, 40 is just a number.
A 7 pip loss at $10 a pip is another thing entirely. (Assuming you are new, and account is small.) And 7 pips doesn't mean you were wrong, and in fact, 7 pips doesn't mean anything.
3) Trading is cheaper on longer time frames. While I go long on a 4 hour chart, you may go long 3 or 4 times. Even on a 2 pip spread, you still have thrown away 6 pips. At the same time, I have gained more pips than you, and only payed 2 pips for it. (I assume that you have to get out and miss a FEW pips here and there to make those trades.)
And more importantly, I also can go have a life. You are glued to the screen in a 5 or 15 min. time frame.
4) Another plus to longer time frames, I am not here to screw up a trade. My favorite trade involved me buying EUR/USD, setting stops, going to the bar and drinking for a few hours with friends. I came home to a winner. THAT is why we started doing this. Don't ever forget that. FREEDOM IS WORTH MORE THAN TRADING.
5) This forum has a lot of wisdom in it. LISTEN to the regulars. It is ok to test strategies, but the real gold here is in the basics, money management, psychology, etc. Merlin, Jacko, and so many others are doing well. I however, don't see the same thing on the same chart. My system will ultimately do better for me than theirs, and vice versa.
6) It is ok to have a loser.
7) Psychology is about 80% of this game. When you are demo trading, it is so much easier to see different levels. That in itself is proof. If you are nervous, then you are playing with "scared money", and that money gets hurt more often than not. Scared money cannot see the forest through the trees. Scared money jumps out at -10 pips.
8) Only a few things actually are reliable. Moving averages are indicators of trend. But not everyone is using the 15, 20, or even the 600. Trend lines however, are obvious, and everyone has them drawn on their charts.
9) Listen and trust yourself on decisions. You are the only one who has something to lose on your trades. Listening to others can be dangerous, as they see things differently than you do. (This refers to decision on taking a trade.)
10) If you are still reading various forums and looking for the "Holy Grail", even after reading it doesn't exist.... you are not ready to advance your trading to the next level.
11) Learning your way in this game takes time. If you are here to get rich quick, you are going to give all of your money away. $250 accounts don't turn into millions at the end of the year.
12) Far too many new traders will never listen to any of these points. About 95%. Strange really, as that is roughly the same amount of traders that will fail in the end.
! )
