Here are the top 3 things that new traders don’t know and should know before taking their first live trade in any instrument (regardless of whether it is futures, forex, Nadex binary options or touch brackets.
#1: Hardest Part of Trading is Not Trading
Most new traders think the hardest part of trading is developing a trading plan. It isn’t! The hardest part of trading is sitting in front of the computer for hours waiting on a trade setup. Hours of watching the screen, waiting, not being in the market. It is so easy to make yourself believe there is a trade, when actually the criteria is not met and you are simply bored and tired of waiting. Traders need to be like snipers — they wait and wait and wait some more until their setup is confirmed and then they pull the trigger. Pulling the trigger too soon and you are the loser.
#2: Hardest Part of Trading is Realizing It’s Not About Winning Percentages but About Risk to Reward
Most new traders expect a high winning percentage and tend to prefer the Deep In the Money trades with Nadex Binary Options (meaning they are risking $80 to make $20). According to the Random Trade generator that I use, the minimum Profitable (or winning) Percentage using this scenario is 83%. While a new trader can always think they would exit earlier, the important determination is will they? Or will they hope and pray that the trade comes back into profits because after all the last one they exited and expired in the money?
However, if they simply change their strategy to limit risk to between $35-40 and take try to capture a profit of between $35-40, then they simply need to win 55% of the time according to the Random Trade Generator that I use. A profitable percentage of 55% is more realistic and one trade is not wiping out the profits of multiple trades like the Deep In the Money Trade does.
#3: Hardest Part of Trading is Realizing the Market Doesn’t Care About You
While this statement may sound crazy, most new traders tend to think the market actually cares about whether they are long or short — it doesn’t. The market will do — what the market wants to do — when the market wants to do it. You will have trading where everything you touch turns to gold and days where everything you touch turns to crap. That’s trading. How do you handle the good days? How do you handle the bad days? Do you take the bad days personally (because you think the market cares about you)? Do you think you have concurred the markets because you had a really good day (only to give it all back because you got to big for “your britches” as mom would say)?
While trading may seem easy and the hardest part of trading may seem which strategy to use, actually it is the discipline and mind set that makes trading hard. Professional traders use a variety of tools and they aren’t all staring at the same thing. They use what they understand but they bring the mindset and discipline of a pro to their trading. Sometimes even a pro has a bad day, but it’s just another day to them. Sometimes even a pro has a fabulous day, but it’s just another day to them.