In this course, you will learn about the decision making process of trading simply, quickly, and interactively. Fear gets in the way of successful trading. That is why understanding and controlling your fear is so important. The idea is to develop a trading plan. Your plan should set your trading goals and identify the price levels and strategies you focus on. Success as a trader requires overcoming your fears and developing the confidence to learn from your mistakes. For long term success, you will need to believe in your ability to make more money than you lose. Most traders know what it feels like to hold on to a trade too long, and see significant profits evaporate as a result. When it happens, it is often the trader's greed to blame. A lot of new traders imagine that it is possible to earn returns of 100 or 1000 times the initial investment from just a few days of trading.
Your decision to invest in the markets should be based on rational analysis. Trading should never be treated like gambling. There are a lot of opportunities in the markets, but you will only be able to exploit them if you learn to control emotions like greed. Most traders focus on deciding what and when to trade. Don't risk your account in a single trade. Remember that the market can go against you. As a trader, your position management strategy is crucial for successful trading. You may not be able to control markets, but you can control how you invest and the amount of risk you take. Your money management strategy should answer these two questions. How much money should I risk on any single trade? What size of trades should I be making?
As a trader, your first goal should be to preserve your capital. If you can stay long enough in the market to achieve some big wins, it should cover the cost of your losing trades. Good money management can help you make this happen. Most experienced traders never risk more than 2% of their trading capital on any single trade. It is no secret that you cannot control the direction of the market, or the extent of its swings and movements. But there is one way in which every trader can achieve control over their trade and that is true money management. Money management is a set of rules and guidelines to help you keep risk at a level where you are comfortable. The Money management answer these three key questions. What should my risk-reward ratio be? What is the right amount of risk for me to accept per trade? How much risk should I take across my account?
The risk-reward ratio helps traders determine the level of risk in a trade. Your stop-loss represents your risk and your take-profit represents your reward. The larger your risk-reward ratio, the more easier you will be able to absorb your losses. For beginning traders, the acceptable risk-reward ratio is 1:3.