This week we asked one of our coaches, Federico Bustos what he wishes he had known when he first started trading.

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Firstly, Fed, when did you start trading?  

I made my first investment, by buying stocks, many years ago when I was 23, but I placed my first trade about four years ago.

Have you traded consistently since then?

Yes. At first, I was just swing trading, but slowly I moved over to day trading.

And what do you know now that you wish you had known when you started out?

1) TRADE WITH THE TREND

There are two ways of making money when you trade. The first is to buy when everyone else is buying (directional trading). The second is to buy when no one is selling (countertrend trading), basically when the market is bottoming out.

2) TRADING IS A PROBABILITY GAME

One of the hardest things to accept is that no strategy will work 100% of the time. No trader in the world wins 100% of their trades. What you’re looking for is to end up in profit. I’ve recently had two consistent months when I have not had a losing week (i.e. I have always made a profit by the end of every week) but that doesn’t mean I haven’t lost any trades. Of course, I’ve lost trades, everyone loses trades, but when you start out, it’s hard to lose, you feel affected by it like you’ve failed. But losing is just part of the journey; you have to learn to lose.

3) TRADING IS NOT PERSONAL

As I described above with losing, it’s hard to detach from your emotions when things don’t go your way. It’s easy to feel like you’re to blame. But no one can control the markets. No matter what you do, how clever you are, how disciplined you are, how good your indicators are, the market can still turn against you at any time. Trading always has that potential unpredictability. You can’t take it personally when the markets do whatever they want to do.

4) TRUST YOUR STRATEGY

I really wish I’d known this one when I started trading, and I see so many traders making this mistake now. You mustn’t manipulate your strategy. Once you’ve made a decision based on your indicators, you take a trade, set your profit level and stop loss, and you watch the price change. If it starts to go up, say, it’s all too easy to close out early to try and bank some profit because you’ve got cold feet. But this can end up having a bad effect on you, emotionally. If you interfere with your strategy, you can end up with two bad psychological effects. One is that you don’t get an accurate assessment of how well your strategy is working. The other is that, if you miss out on profits because you got cold feet and closed out early, you’ll kick yourself and beat yourself up. It’s important to trust your strategies.

5) LESS IS MORE

Many people think having more indicators gives you better analysis but this is wrong. At the end of the day, the more indicators you have, the more you will confuse yourself and it may lead to what we call “analysis paralysis”. Every indicator still carries an element of probability, so if you throw too many into the mix, you run the risk of them contradicting each other and reducing your probability.

If I could turn back the clock, these are the five top points I would try to tell myself. I believe I would have been even more successful and would have more made profit by now had I known, and adhered to, these five things when I started out.

Thanks, for the sound advice!