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How to MASSIVELY reduce the risks of trading psychology

The impacts of trading psychology are amplified and contracted by different elements of ourselves and trading. Controlling these elements is critical in the early stages of trading while you become accustomed to trading, although seasoned traders use these techniques long into their career. 

Reduce the risk of trading psychology working against you, by reducing the capital you are working with and viewing. How can you do this but still maintain a larger account? Trading with a small account of say $500 to $1000 and risking a consistent amount (let’s use 1% for the example) means each trade will risk between $5 and $10 depending on the balance. I call this the “Fund Manager Account”.  

Once you are confident with the results and ready to increase your dollar returns, a trade copier can be set up on the “Fund Manager Account” linking to an account with your desired capital amount and risk tolerance. Watching the Fund Manager Account during trade and focusing on the trade and the market rather than the money will help to keep you grounded and stay aligned with what the market is doing rather than getting worked up into what your dollars are doing. In essence, this will remove many of the emotional risks of fear and greed and allow you to trade to the conditions that control the outcome rather than emotions.   

When can you gain maximum impact for your time

Traders need movement in the market to make a profit, if there is no movement, there is no profit. High volatility times are the times when traders can gain maximum value for their time. People often mention high volatility means more risk. For amateurs this might be the case, but you are not an amateur, so what can we do to ensure the volatility is beneficial rather than a risk. Controlling the volume in higher volatility times is critical, lower volume means lower risk, but higher volatility does counteract it, given the market will move more than lower volatility times. 

Ensuring the volume (lots) you place on a trade is correct for the volatility of the market is critical. Trading in higher volatility times is one way to gain maximum impact for your time spent trading. 

Ways to keep cash and minimise risk in the market by entering and exiting within minutes.

Trading is often seen as riskier than other forms of investing. Of course, it depends on your decisions and the market outcomes, just like other forms of investing. Trading has the benefit of being low cost and nimble, allowing traders to keep mostly cash, using their capital to enter and exit the market quite quickly, even within the hour. This leaves the trader able to withdraw funds if they are needed, use capital when there is a good opportunity and retain a mostly cash position most of the time. Working in small, manageable positions over time gives you more control over trading outcomes, capital allocation and investment decisions. There is a program that is great for this style of trading, in and out of the market within minutes, at a set time each day. The program does take work and time (give yourself around a year or 2) so be ready to put in the effort if you go ahead with it. Click the button below to see more about the program.  

How to gain consistency month over month and increase your trading win rate

Consistency is key, big swings up and down don’t make a good trader, consistent profits do. If you can rely on the income generated, it helps to plan life and understand what you can and cannot do with the money gained from trading. Big swings are filled with hopes, dreams and often despair as you hope for that one big trade to change your life, but then what, back to square one?  

Incremental, repeatable and controlled trading profits create a level of reliability in trading returns. They can be assessed, measured and controlled to some degree. Analyzing your trading is a critical part of improving yourself as a trader. Looking at what works for you and what doesn’t will help to identify potential improvements. Aiming for a controllable return can bring knowledge that you can produce similar results time and time again, allowing you to simply repeat the process and take stress out of the equation. 

How to track your progress to adapt and continue to improve

As mentioned above, tracking returns is critical to improving as a trader. Linking your trading account to a product like MyFXBook provides you with data that can be filtered and assessed. MyFXBook can track hour of day entries or close times, buy or sell filters, symbol filters, month and day of week filters. Assessing where you are doing well and where you can improve will help remove problems from your trading allowing you to earn more over time. As an example, my trading shows very good “Buy Onle” concepts, removing short trades could alleviate a large amount of risk from the trading portfolio, even in times of economic decline.   

How to gain the most appropriate funding for your trading style and financial goals

Understanding the rules and requirements of different funding opportunities is essential to working out the best funding (prop firms) to work with. The factors to consider and match to your trading include:

  • Drawdown limits and your own drawdown
  • Target income % and $ values (What is your goal)
  • Timeframe, how long will you take to earn the required target profit and how long does the prop firm give you to pass
  • Cost and pass rate, how often will you pass, what is the cost to start and what is the cost to try again

How to increase your chances of passing evaluation accounts consistently

Using each of the tips above, focus on controlling your mindset, work with the market and control the risk, learn as much as you can, track and assess your trading and work with the right program offering when it comes to prop firms.   

Before you launch into a prop firm, having trading data already available will really help to work out the likelihood of you passing the challenge. If you know the rules of the prop firm challenge, and they match your returns and maximum drawdowns, you can enter more confidently. Being able to consistently pass prop firm challenges means unlocking the ability to access capital to trade and also unlocking the income that comes with it.