To become a successful trader, understanding and mastering three fundamental principles is crucial: trend, margin, and patience. Let's discuss each one in detail.
Trend
Trend is the first aspect every trader must understand. Following the ongoing trend in the market is the initial step in making the right trading decisions. The basic question often on a trader's mind is, "Buy or sell?" The answer to this question can be found by understanding the prevailing trend.
How to Identify the Ongoing Trend
Identifying the current trend can be done using various technical indicators. Some simple indicators that can be used to identify trends include:
- Moving Average: This indicator helps smooth out price data to identify the direction of the trend. You can choose different variants and periods of the moving average according to your needs.
- Parabolic SAR: A simpler and easy-to-read indicator that helps determine potential entry and exit points in the market.
- Average Market Method: This method can be an alternative to understand the market trend.
The most important thing is to follow the trend, as "the trend is your friend." Avoid going against the trend if you don't want your position to get caught in unclear floating conditions. Following the ongoing trend will help you avoid mistakes that could lead to significant losses.
Margin
After knowing the trend, the next question is, "How many lots should be taken?" This is where understanding margin becomes crucial.
Managing Margin Effectively
Good margin management is key to keeping your trading account healthy. Excellent analytical skills won't be useful if not followed by proper margin management. To ensure your account's longevity, it's important to be disciplined in managing your margin. Avoid being overly aggressive in taking large lots if your capital doesn't support it.
Patience
The third principle relates to the psychological aspect of trading. A good trader is a patient trader. Patience in trading means not rushing into decisions and sticking to the trading plan.
Becoming a Patient Trader
Patience is key to avoiding impulsive trading decisions. Initially, you might find it challenging to remain patient, especially if you often feel "itchy" to enter the market immediately. However, with practice and discipline, this patience can be developed. Becoming a swing trader who adheres to the trading plan is one way to practice patience.
Trend, margin, and patience are three fundamental principles to focus on if you want to become a good trader.
- Trend: Following the market trend helps you make the right trading decisions.
- Margin: Good margin management ensures your account remains healthy and sustainable in the long term.
- Patience: Patience in trading helps you avoid impulsive decisions and adhere to the trading plan.
Never stop learning and experimenting. By focusing on these three principles, you will be on the right path to becoming a successful trader.