Living off trading: 4 golden rules

Building the “foundations” of trading is essential if you want to make money on funeral markets: the first thing you need to do is to fix these 4 rules well in your head because they are the indispensable foundations if you want to trade for a living.

living off trading

I make a premise, in all honesty: I don’t trade for a living. However, I have almost ten years of experience because my first blog on trading forex I opened it in 2012, when I started trading. Since then many things have changed, but trading always accompanies me: it is a less than a secondary source of income, but constant.

In addition to mine, however, “I bring you” the experience of professional traders with whom I collaborate and compare myself. Some are friends, some are just social contacts, but everyone has taught me something. I realize that you will almost certainly have to totally revise your beliefs, but believe me, there are no alternatives. The real problem behind the failures is this: the basics are missing.

Living off trading: less is more

Who says that to earn with trading you have to do hundreds of operations per month and always stay on the computer? This is undoubtedly a false belief. In my personal experience I noticed that the more I was on the PC, the lower my performance was, with a lot of stress and anxiety.

In addition, the more you do, the more you earn the broker with commissions.

So what is the best approach to trading? Definitely a minimalist approach, which involves staying on the PC for 20 minutes to a couple of hours a day, operating in the long term without being influenced by the intra-daily movements of the markets, which often create more confusion than anything else. As you may have guessed: no to scalping, which “casually” makes brokers earn a lot with commissions…

Let the profits run with a dynamic stop loss

Letting the profits run means not to stop a profit position at a pre-set limit. In other words, don’t set a fixed take profit and let the price move more naturally without forcing.

An interesting and fairly easy to manage approach involves the use of a dynamic stop loss (trailing stop) that follows the price trend. So the more the price goes up and the more the dynamic stop loss goes up, making the profits run as much as possible and completely mechanically.

Cut your losses if you want to trade for a living

The complete sentence says: “let the profits run and cut the losses”. What does it mean? That if an operation is not going as planned, simply close it.

Obviously do not close a position in a discretionary or manual way, but use a stop loss that makes you lose at most a small part of your trading capital. Generally this sum varies between 1 and 3%.

Bigger is better

Why settle for earning only 1 or 2% for each profitable operation? Considering the previous rules, it is easy to understand that a good trading operation should close with a gain of between 5% and 20% (wow).

So, once again: no to scalping, or you will have to spend hours and hours on your PC doing many operations to put together a decent profit, but the more you do the more you risk losing.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

DISCLAIMER - Finance Drops is a blog that deals with topics related to personal finance, economic growth and savings management. It does not offer financial advice, the analyzes reported are to be considered general contents for information purposes. Finance Drops articles that talk about money cannot guarantee certain results because the possibilities vary according to the ability and economic situation of the reader. Finance Drops, therefore, cannot guarantee the success of the suggested strategies and does not assume responsibility for imprudent choices made on the basis of an incorrect perception of the contents of these pages. Risk Warning: Past performance reported in the articles cannot guarantee future results. Furthermore, products that allow access to leveraged instruments may involve a high degree of risk of loss of capital. All the solutions mentioned offer truly effective protective measures to manage risk, but sometimes it is possible to lose more than you invested.