The Most Important Trading Lessons I’ve Learned

Have you ever wondered why 90% of traders lose money while trading. Did you know that almost 80% of traders quit in the first two years of unsuccessful trading.

The harsh reality is that trading is not easy and you as a trader must know exactly what you’re doing if you want to stick around in the game for the long term

I traded the Forex market for the past seven years and I will share with you my most important lessons I’ve learned so that you don’t make the same mistakes I did.

 

The first lesson I’ve learned is that overbought and oversold levels are NOT RELIABLE in the long term.

When I started trading, I took the advice I read on different books about the overbought and oversold levels and you know what the majority of books teach us that if a market reaches overbought levels meaning that there are too many buyers on the market then the prices should go lower and different market which is oversold levels meaning that there are too many sellers on the market the prices should increase.

After a lot of money lost, I realized that the trading reality is that simply because the market which is overbought or oversold levels DOES NOT MEAN that the market prices will immediately reverse in the opposite direction.

During periods of strong upward trends or downward trends the markets can remain in the overbought or oversold areas for days weeks or even months.

Let’s look at this chart.

Many traders believe that when the RSI or the stochastic indicator hits or exceeds values of seventy or thirty they should enter in the opposite direction.

That’s a WRONG APPROACH to what concerns these indicators. Sometimes the prices can stay a long time in the overbought and oversold areas and during this time they can continue to go higher or lower.

For every valid overbought or oversold signal offered by these indicators, there are other ten false signals.

In the long run, chasing overbought and oversold levels is not profitable. I have stopped watching these levels a long time ago and never looked back.

 

Another lesson is that the 200 DMA was the only moving average I needed on my charts.

Let me ask you if this sounds familiar.

You plot five or six indicators on the chart and after a bad week you remove those indicators and add others and the next week you repeat this process once again.

This was my style when I started trading.

My charts consisted of many indicators.

Once I removed from my charts all the other indicators and moving averages and focused only on the 200 EMA, my trading improved a lot.

The 200 EMA turned out to be very effective during training periods and an important tool for identifying trends for establishing potential areas of dynamic support or resistance and even accurate entry points on the market.

Why is the 200 EMA so reliable in the technical analysis…?

Well it is believed that many institution like banks, hedge funds, Forex dealers are following this indicator.

If we take a look at this EMA on any currency pair commodity or even cryptocurrencies, we can immediately see its value.

 

Another lesson was that demo trading won’t accurately predict how you will perform when trading with real money.

The reason is simple and obvious.

If there is no money on the line, you eliminate one of the most important variables that affect your trading decisions.

The psychological pressure of risking real money.

Even if you perform extremely well when trading a demo account, your results when you start to trade on a real account might differ considerably.

So, you should demo your strategy until you feel comfortable taking your signals what I personally would not get focused on demo accounts for too long.

Once you tested your strategy and managed to have a positive returns on demo, open a micro account and trade there for a couple of months.

Start small with few money and trade with sense instead of dollars even if you trade with sense you will feel the market much better than trading on a demo account.

Another critical lesson was that losing money is in fact a good thing as I said before trading is not easy and you should treat it as a learning experience.

Losing money is very important for every traders development.

It will teach you many things that you are not aware of.

Now don’t get me wrong losing is not fun and you will probably find it very unpleasant.

While it’s not enjoyable to lose money while trading, in the end you will learn more from taking a loss than from a winning trade.

The important thing when you lose money is to LEARN from this experience and NOT TO DO THE SAME THING AGAIN.

You get an education for that lost money and come out a little smarter in the future.

Believe me, once you learn an important lesson when losing money, this prevents a much larger future loss.

 

Another lesson was that you should trade a strategy that matches your personality.

When I started trading I found an online course that was teaching sculpting.

They claimed a high success rate and I tried their approach for a couple of weeks after that I was down 20% in my account.

You see,

…the key to successful trading is finding a strategy that works and that fits your personality.

The reason I was struggling with scalping was because I didn’t enjoy that fast paced trading style. I didn’t want to monitor the price section very closely and I didn’t want to sit all day in front of the screen.

Even if their trading strategy worked, it did not fit my personality so I ended up losing a lot of money.

My advice for you is to find your risk conversion, your risk tolerance, you should look for the timeframe that matches your training style, see if you are day-trader a swing trader a position trader or a scalper, ask yourself if you are a technical trader or if you prefer fundamental setups, choose the indicators or other tools that you feel most comfortable trading with.

These simple elements will help you in establishing a strategy that will fit your personality.

 

The final lesson was probably the most important one.

When I stopped thinking about the huge profits I could make, and focused on preserving my capital, I noticed a vast improvement in my trading results.

Successful traders concentrate their efforts on how much money they could lose before thinking about how much money they could win.

The key to making money over the long term from trading is simply staying in the game.

You need to preserve your capital so that you can stay in a game long enough to see your trading system reward you.

When I started trading I had a gamblers mentality and I suspect a lot of you have this mentality too I focused almost entirely on how much money I could win with almost no regard for losses.

When you start trading, you should ask ask yourself when I will become profitable, you should ask yourself how can I trade while preserving my capital and what should I do to limit my losses and be in the game one month one year from now.

So in order to be successful, you first need to become a break-even trader.

The beauty of being a break-even trader is that you protect your capital while gaining market experience.

You don’t lose money and guess what, you will be ahead of 90% of traders.

Those were the most important lessons I’ve learned in the past seven years.

During my trading journey I’ve had my ups and downs.

I am still losing trades, and I still have my doubts when taking a trade but there’s the job of a trader and whoever tells you that waiting is easy well is lying to you.