A. By the sounds of it Grant, it looks like you’re well on your way to becoming a great trader.
I do have a quick three-point check list that I use to see if a trader is doing well.
Checklist item #1: You first manage risk and then manage reward
Most new traders only focus on what they can bank and how much they can profit.
This is what leads them to destroying their portfolio.
They don’t consider what happens if a trade turns against them, nor how much they can lose. And after a couple of trades, without a money management plan, their losses end up eating their entire trading account.
The most important checklist item is knowing you are following a few money management rules before you enter a trade. This includes:
• Always using a stop loss (level to get you out of your trade if it turns against you)
• Where to place your stop loss
• How much of your portfolio you’re willing to risk per trade
• Knowing when to stop trading when the market environment turns against you
Do you have strict money management rules and ways to limit your losses?
Then tick that item off the list…
Checklist item #2: You feel completely relaxed with your trades
Psychology is also a very important aspect when you’re on your path to trading success.
As a successful trader there are three inevitable outcomes. You’ll profit, you’ll lose money or you’ll lose nothing.
And whether you bank a winner, loser or nothing – you’ll need to always stay calm, focused and relaxed.
The more grounded you are with your trading, the more rational and logical you’ll be when you’re dealing with your trades?
And so, if you feel calm when you take a trade – that’s a great sign of a successful trader…
Checklist item #3: You measure in percentages not profits
Whether you have a R1,000 trading account or R1,000,000, it doesn’t make a difference.
Successful traders only care about one thing when it comes to their Return on investment – percentages…
Why? Because it’s all relative to your own trading portfolio value.
And you should have two main percentages with your trading, when you start out…
• The percentage risk, of your portfolio, you’re willing to take with each losing trade
• The percentage gain, you’re hoping to make with each winning trade.
I only risk 2% of my portfolio per trade to make at least 4% on each winning trade.
And if I take 3 winning trades a month and bank 2 losing trades, I’ll still be able to walk away with an 8% return on average (3 Winners X 4% gain) – (2 Losers X 2% loss).
If you focus on percentages rather than money value, you’re well on your way to trading success…
If you can tick off those three items, you’ll know you’re well on your way to trading success.
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Q. “I read your fourth Bitcoin prediction article Timon. I was wondering if you think another reason for Bitcoin’s rally is because major investors are buying bitcoin?”
A. Great observation.
Bitcoin is not the speculative digital asset, that it was four years ago.
In fact, when I look at the massive volume of orders coming in, we can confirm that huge investors, corporations, and institutions are investing for the long term.
Even billionaire Mati Greenspan, portfolio manager and founder of Quantum Economics says:
"The main difference between now and the 2017 rally is that back then the market was driven by retail speculation and now it's being driven by corporations and billionaires,"
And because there are so many new developments with Bitcoin as I mentioned in Monday’s article
– That’s why it’s a much better alternative investment today than many other traditional markets…
Especially with the ongoing pandemic which is destroying economies and markets.
No business or corporation has been operating at its fullest this year. And so, major
investors are looking into other alternatives and are piling into Bitcoin instead. These all help drive up the price and will continue to do so.
Managing Editor, Trading Tips