Controlling risk while trading takes many forms. It starts with properly selecting which markets to trade, then moves on to decisions about allocating capital and taking appropriate-sized positions. But managing risk and limiting losses also is accomplished through understanding risk itself as well as human nature. Any trader’s chance for success improves with a disciplined use and understanding of money management techniques.
Losing money is a particularly difficult test for new traders, who tend to lose very often. It is very hard to believe in yourself when you have no history of success and no way to put losses in perspective. But, being a good trader is like being a good baseball player who is considered a superstar if he gets on base 4 times out of 10. You don’t have to win every time to be a successful trader. You just have to understand that’s the way it is and be comfortable with it.
This section is designed to help you:
– Understand your personal psychological barriers that you will have to overcome to become successful
– Examine why some traders make bad decisions and how you can overcome the urge to self-destruct
– Reinforce the importance of developing a trading plan that is unique to you and your personality
As a trader, you will come across many factors that you must consider before entering or exiting the markets. Some of the most important aspects to look for are economic events that can move the markets drastically one way or another.Â
There are many types of economic events including releases by a governing body, changes in sales or consumption of commodities, and increases in supply and demand. All of these can affect the markets you trade, making it important for you to know how and when these changes are happening.
You have created your trading plan and developed a risk management strategy that works best for you. Now it’s time to define how you plan to make buy and sell decisions. Some traders and investors like to look at price patterns on a chart and technical indicators to make a decision, i.e., technical analysis. Some prefer to back up their decisions with news and data, i.e., fundamental analysis. Still others combine these two techniques.Explore the differences between fundamental analysis and technical analysis. Learn an important concept that traders need to understand—the difference between trending and anti-trending markets.
Traders who win consistently treat trading as a business. While there is no guarantee that you will make money, developing a trading plan is crucial if you want to become consistently successful and thrive in the trading game. Every trader—no matter your experience—needs a plan.
There are two types of analysis used by traders to inform their trading decisions. Technical analysis and fundamental analysis. You will learn about the various patterns, indicators, and analysis techniques traders use when studying the price of a commodity. We will start at the beginning by learning how to read price charts. Then we’ll cover some of the more popular techniques such how to identify trend and reversal patterns, finding support and resistance levels, and various oscillators.
Fundamental analysis is the process of determining the model price of a futures contract, now and in the future, using factors like economic data and industry financial conditions. A trader using fundamental analysis to inform their decisions is looking at how supply and demand could move price, now and in the future. The type of information a trader will use to formulate their opinions will differ across products, in this course we’ll look at each class of products and cover some of the variables that could impact price.
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