Last week in the first part of “How to start trading forex & stocks” I covered questions such: what is trading, what is the forex market, the must of quality education, goals, brokers,what does trading require and the need of limits. Today I want to continue the quest and talk about other important subjects that must be considered before and after you get involved in the financial markets.
Today I will talk about:
- Equipment
- Mentor/Community/Group
- Time & Money Limits
- Respecting The Market
Equipment
In this category we can include many things but I want to discuss the most important in my opinion.
Trading Zone/Room
First of all if you have decided that you will spend time and effort to become a trader it is a important to fix yourself a trading room or trading zone of some sort. A place that will be your fortress when you are trading and analyzing the charts.
To be on your A game, try to minimize the distractions as much as possible. Dogs, kids and all other beloved ones could be a great distractions.
Just like you can’t drive and read the newspaper while talking on the phone, you probably won’t do good trading, managing trades, cooking, cleaning and changing diapers all the same time. We are all busy and our life styles differ BUT try to split and organize your time accordingly. If you simply don’t have 5 hours a day or 6 to trade in full focus – don’t.
See how much free time you can find and dedicate it to trading but from now on this time is trading and trading only.
Monitor
Next you have to think about the actual equipment that you will need to trade. I’m not saying it is impossible to trade on a 13/14 inch monitor but you will most likely achieve better results if you do so on something larger, say 17/18 inches or above. You don’t have to spend too much money on one. We are not graphic designers. You can find a great second hand monitor 20-24 inches for under or around $100 – click here to see some offers for monitors.
Hardware
When it comes to computer configuration it is really up to you. You don’t need a gamer’s computer. Something in the mid range will do perfect job for you. Remember RAM is more important than CPU for us the traders. I’m not going to say anything more as this is strictly individual and for some i7 with 16 gigs of ram is not good enough while for other i5 and 8 gb of ram is doing just fine.
Comfort
I would also like to cover the important of your chair! Yes the chair. For those of you who are going to spend 30 minutes up to an hour that won’t really matter. But if you are planning to spend more time your health depends on the chair. Don’t be cheap on this one. Also don’t order one online. Go to the store and try them out. Many times, what looks comfortable on a picture is not.
Mentor/Community/Group
Before you become a top notch trader that is wanted worldwide from hedge funds and banks you will be a retail trader. The sad reality is that the work of a retail trader is lonely. Lonely in two ways. First of all if you are trading full-time you will be alone most of the time – be that may in an office outside your home or in your home. Second is the psychological loneliness which i believe has a greater influence on us as home traders.
In the first case you can easily fix the problem by going out to socialize on daily basis after work etc… However having a psychological support during hard times, especially in the beginning of your trading journey could be crucial. In fact it could be the difference between you making it as a trader or not. I have seen people who had the potential, the energy, the brains and the will to become traders but they failed. They failed because in hard times, when there was no explanation why THIS or THAT happened, they got crushed – mentally. You may cope with it the first 5 or 10 times but eventually you are overwhelmed by this feeling and you quit.
Picking the right mentor will guarantee you that mental support in tough times. It will also provide you with education. Even if you are a self-learned, you can’t learn experience. Experience is gained with tons of practice, sweat and tears. Do your homework, do your research but make sure to pick the right mentor and stick with him.
Next to your mentor is your community or group. Retail trading might be a lonely job but we certainly don’t have to be alone when we do it. Thanks to technology we can be in the same “room” while being on five different continents. Sharing ideas, opinions, good jokes and laughs could improve and will improve your performance tremendously.
When you are part of a community you can share, ask and learn. Most of all you will find people that are passionate about the same thing you are passionate about. People with common interests and people with whom you can talk on subjects that are usually “taboo” in our families and in the pub when we go out with friends. Talking about the Euro breaking out that daily wedge is not the best pick up line nor is the best topic for conversation with somebody that doesn’t know anything about trading.
Time & Money Limits
Before you invest real money to trade with stop for a second and think about what i’m going to say now. You must think about how much time a day/week you are going to spend trading and two – you must think about how much money you are gong to invest. Money that you are ready to live without and lose. Money that you are not going to think about. Consider them gone, put in a savings account if you will. Money that should not make you twitch if I tell you – ok i’m going to burn them down. Don’t trade with money you cannot afford to lose because you will lose them.
The psychological pressure that you will experience if you are trading your rent or food money will probably be with the equivalent of seven Gs on your mind.
Why do I mention time? It is very simple. If you only have 15-30 minutes or so to look at the charts, don’t try to scalp on the 5 minute chart. You won’t be able to analyze correctly, you won’t be able to manage your trades correctly, you won’t have enough time to pick the best setups because you will be pressured by other tasks on your list (your kid must be picked up from school or so). Stick to Daily/Weekly charts that you can analyze in the weekend in peace. Right down your setups and find your entries on D1 or H4 charts during the week. Moves tend to happen slower on the larger time frames allowing you to spend very little time and still make the right decisions. This way you can still wait for best trade opportunities. A few pips don’t really matter when you are looking at 100-200 pips move.
Respecting The Market
What does that mean? It means that you should not try to beat it. The market is stronger than you. You must accept it. Instead of beating and going against it, try to go with it.
Think about it this way. Mike Tyson vs Sammy Scaff. This is what the statistics are saying:
Mike Tyson – Wins: 13, Losses: 0, Draws:0, KO’s: 13
Sammy Scaff – Wins: 13, Losses: 6, Draws:0, KO’s: 11
Before you watch the video below, on which one would you put your money? I know I would bet on Mike Tyson. We can’t know for sure that Tyson will win but statistically he is the better boxes.
Same goes when you are trading. Try to be on the side of the stronger move. Even if you try to revenge the market after a loss, you are probably going to lose again. Respect the trend. You can’t move the market in the direction you want it to move, so go with the market, regardless of what direction the market has decided to go.
If you can’t beat them, go with them in other words:
Adapt or Die
This is the law of nature and trading is not an exception. Trading could be fun and profitable, full of happy moments or it could be mind crashing, pocket emptying animal that rips your apart something like the first scene below:
That would be all! Learn smart and trade smart. What else is crucial in your opinion for a beginner trader? Please share your opinion below!
If you like it – share it!
Yours,
Vladimir
