How to Trade Like a Sage
Read on to start your journey to empowerment and wise trading.
*Sage FX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.
- The Know-How Behind the Craft
- A 5-Step Guide
- Continuous Learning
The Know-How Behind the Craft
So you’ve heard the day trading rags-to-riches stories and thought to yourself – why not? If you want to be a trader and trade like the pros, there is a certain flair that needs to be acquired. In other words, a knack to use the right methodology, to absorb risk and manage it, and understand the psychology of trade. These main areas are what you should aim to master before you consider yourself ready to roll into trading. While risk management and having a proper mindset is the most important of the three, we will cover them all in this article. Read on to start your journey to empowerment and wise trading.
A 5-Step Guide
Step 1: What Motivates You to Trade?
You want to make more money. And quite bluntly, who doesn’t?
But it is not only the end-goal for your motivation that matters in this case. It is more about the reason that led you to opt for trading as a means to reach your goal, that is, to make money.
So why did you choose trading over other ways to generate income?
To make money while trading, you must come to terms with the fact that you will lose. You may lose a little, rarely, or often. And the statistics are not in your favor. If at that point you are still not deterred, we recommend that you embrace the reality of what’s to come: the risk of loss as well as actual losses.
So how can you achieve this state of mind?
Understand that making money from trading is actually an isolated outcome from a diverse basket of trades. Your losses will eventually lead to wins – if you follow a specific strategy or style.
Also, learn to own your trading style. Build your confidence, and do whatever it takes to feel good about your moves and results. This means, being open to learning new things that give you added knowledge in the field. Take classes, webinars, do some research, or get a mentor. And do your training. Do that, until you develop your style and can own your losses while knowing that you are still on the right track.
So do not feel defeated by losing. Allow every experience to be a step up regardless of the outcome. Otherwise, if you are unable to trust yourself, it will show up in a trade and you will follow your emotions.
What can I do to tune out my emotions?
Practice mindfulness. Meditate. Exercise. Cook. Or do the dishes!
The important note here is to have an activity that allows your mind to be clear, focused, and calm. Whatever it is that helps you refresh and regroup, do it regularly. We can’t stress enough the importance of leading a healthy life. You might wonder what has diet and exercise got to do with trading?
It is a cycle of positivity, align your body and mind, and many things will seem easier. You will manage stress and anxiety more appropriately and therefore trade more wisely.
Step 2: Knowledge and Acceptance
Try to find a market that allows you to run small volume trades with low risk. Use these accounts to train and hone your skills before jumping in with the big fish. The key is to trust that you have a far-reaching overview of the system that you have chosen.
Test. Testing correctly is incredibly important. You can do it by posting a minimum of 100 to 200 trades in your spreadsheet. Assess your backtest results and take notes to weigh the losses versus the wins. Always delve deeper into key statistics like Most Consecutive Losses and Largest Draw Down Period to understand your KPIs (Key Performance Indicators). It is mainly taking a step back to analyze and move forward more positively and confidently.
Things to keep on your radar when you are in testing mode:
- Your reaction to risky sets
- The net profits from all your trades
Realism and optimization
Just like there aren’t any shortcuts to success, there are no shortcuts to growing your trading account. Only dedicated work will get you to the place you wanted to begin trading for. It is a step-by-step process that requires a realistic approach and a lot of optimization along the way. Backtesting is a necessary stepping stone in your optimization journey. Without it, you cannot fully trust your trading system.
Our tip: Lower your expectations, work smart (not necessarily hard) and keep learning from every trade experience.
Stage 3 – Practice, Practice, Practice
Practice makes perfect. The saying is true in trading too. So, you can do simulation trades in the market. It surely is not the same as real-life trading – but you can’t expect it to be so, as there are variables that are often unknown. However, simulations have an added value. They allow you to practice and perfect your skills by executing trades in real-time. You can trial run your strategies, add trades to the spreadsheet, build a data set, and gain know-how. The repetitive tasks and watching how things play out on the charts reinforce your confidence and knowledge in day trading.
Run simulations for a few weeks or more until you have a solid understanding of how the system works and that you can recognize all and any trade setup. Take the time to practice all the rules in full and train your mind to identify the right time to quit. Cultivate a disciplined mind and ultimately you will strengthen your risk management technique and your trading flair.
Make mistakes, and learn how to avoid them. These include execution errors, second-guessing, moving your stops, and targetting out of your plan, missing an entry, among others.
Our Tip: If you can run more than 20 consecutive mistake-free live simulated trades – it is time to trade like a sage.
Stage 4 – Day Trading Live
Following your simulation period, and – we are assuming – your ability to maintain 20 consecutive mistake-free trades, you are now ready to rock and roll (day trade). Fully equipped as you now are, the success you’ve dreamt about is at your fingertips.
You’ve experienced it yourself, even in simulation, that emotions play a big role and you must actively reduce their impact on your actions. And now that you’re trading in real life, you will not panic when you lose a trade, because you already know that losing trades is part of your win. Your edge will have its rewards.
Just like you practiced to be mistake-free in simulator mode, at first start by following the same rule while conducting a simple live day trade with real money.
Our tip: Take it easy and do it step-by-step to avoid overwhelming yourself.
Stage 5 – Monitoring, Tweaking, Improving.
Every exclusive club has a trial by fire. So, you have to go through your rite of passage in trading. Start with a 2% risk per trade. Establish your previous day balance and identify your effective risk. Decide how many contracts you can take on for your chosen market and timeframe. Keep your risk level at a low 2% risk even as you begin to grow. Do some backtesting with other markets and timeframes when you feel ready to branch out. Repeat the same steps as many times as necessary.
Our tip: don’t lose sight of your ultimate goal. Accept, embrace the risk, and the methods used to make money.
Continuous Learning Process
To trade like a pro, the emphasis is on staying on top of your game at all times. It takes consistency. Turbulent markets are even harder to navigate, and anything but consistent. You need a lot of patience and steadfastness to avoid throwing away money. It is also quite easy to get lost on your way and follow redundant strategies. That’s why our final recommendation is to keep practicing even when you gain considerable experience with live day trades. And, if you can do so, shadow a mentor. Pick your mentor with care, s/he needs to be a wise trader that can impart his/her hard-won techniques and tricks. Learn from the wise to trade like a sage, and you will reap the rewards in the long term.
Trade Like a Sage
Sage FX is a client-first fintech team. We live by our values; to have trust and knowledge at the heart of our trading platform, bringing traders success and peace of mind. Sign up today and let us handle the technical arrangements and go on to pave your own independent road to success. What are you waiting for? Learn to trade like a sage.