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Trends & Analysis
News

TJX announces strong sales, dividend hike

News

Who wins the S&P 500’s bank battle?

News

USD/JPY edges lower on economic data

News

Li Auto shares race ahead on upbeat earnings

News

Can anything stop NVIDIA?

News

Gold rises on soft dollar, geopolitical concerns

Learn

How to Master Your Mind to Take Your Trading to the Next Level

All traders lose at times, the key is to accept that & learn how to improve. Get tips from the pros on how to discipline your mind and fine tune your strategy.

Disclaimer: This article is an educational guide to CFD trading and the financial markets and should not be considered as advice. Trading CFDs is high risk. Always ensure you understand the potential risks and rewards associated with trading before you trade.

 

 

“There is a time to go long, a time to go short and a time to go fishing.”

– Jesse Livermore

 

Jesse Livermore is counted among legendary traders like George Soros, Warren Buffett and Stanley Druckenmiller. He made his first $100,000 at the age of 28 . At his peak in 1929, Livermore was worth $100 million , which would be worth about $1.5 billion today! Do you know what the secret to his success was? No, it wasn’t that he never lost a trade. It was his focus on learning from his mistakes.

In other words, it was his trading mindset that helped him move forward to make winning trades even after a string of losses. This is true of all successful traders. It is your trading psychology that determines your market performance as much as asset price moves do. Want to know how you can develop the right mindset to take your trading to the next level? Here are our top tips.

Develop a Trading Plan

“All successful investors and traders have something in common – they treat trading as a business.”

– Alexander Elder

 

The first step to making the most of market moves is to build your trading plan or strategy and then stick to it, regardless of any temptation to improvise. When you create a plan and use it to guide you, it becomes easier to prevent emotions from influencing your trading decisions.

While creating your plan, some of the factors to keep in mind are:

  • What signals will you use to enter a position?
  • When will you exit the market?
  • What is your profit target for each trade?

But all this is easier said than done. Just remember to revisit your trading plan whenever you feel overwhelmed with emotions such as fear, greed or even stress.

Did You Know?

Jesse Livermore loved short-selling stocks and then buying them back when the share price dropped. In 1901, he shorted Santa Fe Railroad and US Steel (NYSE:X) using his entire capital plus leverage of 4:1. The result? He lost $50,000 in just a few hours , leading to him being not just broke but $500 in debt!

 

Practice, Practice and Then Practice Some More

“You have to learn to lose before you can win.”

– Paul Tudor Jones

 

Learning about the markets, reading and watching videos is good for growing your trading knowledge. But until you experience it for yourself, and practice controlling your emotions and mastering a trading mindset, it will be difficult to be disciplined in the live markets. This is why practicing on a demo account is crucial for beginner traders. A demo account will give you access to real-world market conditions without you needing to invest any capital.

Practicing on a demo account will also help you fine-tune your trading strategy. In fact, experienced traders go back to their demo trading account to try out new strategies and modify existing ones. However, do keep in mind that trading with your own funds in a real account can be more stressful.

Backtest Trading Strategies

It is a risky business applying trading plans to real-world trades without knowing how well they work. Backtesting is the best way to ensure that your trading strategy works in the live markets. This can be done on a demo account to check whether this strategy would have worked on past trades, and to discover when the strategy would have failed.

Strategy Tester is a good tool for backtesting, offered on MT4 and MT5. It can be activated by choosing the Strategy Tester option from the View tab in the top menu or pressing CTRL + R on the keyboard. Backtesting makes it easier for traders to check the efficacy of their trading plans.

Did you know?

In 2008, Warren Buffett bought a large stake in ConocoPhillips (NYSE:COP) with the aim of capitalising on future energy prices. But this ended up being a bad investment, since Buffet had bought the shares at a very high price, leading to a multi-billion-dollar loss for Berkshire Hathaway.

 

Regular Breaks are Important Too

“There is a time to go long, a time to go short and a time to go fishing.”

– Jesse Livermore

 

Whether you are a novice trader or a seasoned veteran, regular breaks are important to keep your trading mindset in place. Taking a break from the markets helps relax your mind and relieve the emotional strain that is only natural in volatile financial markets. A break could be especially beneficial if you have experienced a string of losses or had an exceptionally stressful trading day.

And if you feel that your emotions are beginning to take a toll on your trading decisions, it is definitely time to walk away from the trading terminal for a while and do something you find relaxing.

 

Accept That There Will be Losses

“In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”

– Peter Lynch

 

By now it must be clear that even the great Oracle of Omaha (Warren Buffet) or the Man Who Broke the Bank of England (George Soros) have faced their fair share of losses. Trading success does not equate to the absence of losses. The aim is to ensure that the wins are in greater number or volume than losses.

The key is to accept that loss is a part of trading and have a backup plan ready for when it hits. As mentioned above, it could be a good idea to take a break from trading after a string of losses and review your trading journal. Follow other traders and learn about their trading strategies. This will help you hone your trading plan for the future.

Did you know?

In March 2008, George Soros bought a major stake in Bear Stearns at a price of $54 per share. A few days later, JPMorgan bought the investment firm at a mere $2 per share. Soros might have been correct about Bear Stearns seeing a significant price move, but he erred on the direction of that move!

 

Key Takeaways

“The key to trading success is emotional discipline. If you can control the downside, the upside will take care of itself.” – Marty Schwartz

  • Long-term success in the financial markets is all about developing the right trading mindset.
  • Creating an efficient trading plan and sticking to it is crucial.
  • Trading plans should be backtested for their efficacy on a demo account.
  • Practicing on a demo account can help you learn how to prevent emotions from controlling your trades, but there is no replacement for the pressures involved in trading live with your own funds.
  • Accept that there will be losses and take a break from trading if emotions are overpowering your trading decision.

 

Open a live account with ADSS to gain access to a powerful demo account to build your trading mindset.


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Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.

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ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.