Four simple rules to become a professional investor: Learning the basics of trading in the investment industry is a very critical task. Many traders have tried to master the core art of trading but failed miserably. Most people start their trading career with extreme greed and they keep on breaking the basic rules. But to make money, you must learn to survive as an investor. Without developing the basic surviving skills, it is going to be a big challenge to overcome the key obstacles at trading.
Today, we are going to discuss four simple rules which will help you to master the art of trading within a short time. So, without any delay, let’s get into the details.
Table of Contents
1% rule of money management
As a currency trader, you should not be risking more than 1% of your account balance. If you take more than 1% risk in the trades, you will slowly mess things up and fail to evaluate the critical market data. Some of the big investors often trade the market with less than 1% risk. On the other hand, novice traders open a high leverage trading account and expect to make a big profit without learning the basics.
Leverage is more like a powerful sword that causes you big trouble. If you wish to succeed as a trader, you must study the critical variables of this market, and lower down the leverage of the trading account. Once you start taking the trades with the low leverage trading account, you will become more confident with your actions. And thus you will no longer trade with high risk.
Crafting a basic strategy
You should craft a basic strategy by using your logic. Without having a strong basic strategy, you will be beating around the bush. Professional traders usually rely on the demo trading account to learn things about future investment. So, try to find a good broker like Saxo and develop your skills. Study the important support and resistance level and see how it works. A support level should provide a strong buying area and the resistance level will create intense selling pressure on the market. You might be thinking that you learn about this factor is going to be a tough task. But if you stick to the demo trading account, it won’t take much time.
Some traders often start their trading careers with bad brokers. They think they can become a professional trader without doing the proper market analysis. But this is not how this trading industry works. Emotions have no place in the investment business. So, stick to your trading method and try to develop your skills.
Learn risk management techniques
You should be learning about the basics of risk management from the start. Without having strong risk management skills in the trading business, you will be messing things up. Never think by risking 1% of your account balance is enough for you to protect the trading capital. Let’s say, you have opened 10 trades and in each trade, the risk exposure is 1%. So, the overall risk is a factor is 10% of your account. By doing so, you are imposing a great threat to your career. The overall risk exposure should never exceed the 2% risk factor.
Though it will be tough to trade with low-risk factors, you can lower down the leverage from the start. By doing so, you will limit your buying and selling power. Thus you will no longer trade this market in an aggressive way or look for bigger gains.
Study different time frame
To find the best signals in the market, you should be studying different time frames. Without having a strong basic knowledge of this market, you will never learn the proper way to eliminate false signals. Start with the multiple time frame analysis. Once you learn this technique, you can easily determine the false signals in the market and make logical decisions without having any problems.