If you ask any successful trader or investor what the most important thing in trading is, they will tell you it is Capital preservation. In fact, the hardest thing about the markets is not making money, but being able to keep it and grow it over the long term.
How many times have you made a profit just to put it back into the market the next day, week or month? This can be very frustrating and lead to even more mistakes that ultimately result in blowouts.
Now, there is no secret formula that will give you the opportunity to keep the money you earn and never give it back, because losses are a natural part of trading. There are, however, some tips that can help.
One of the most important things is to only select professions for which you have a very strong conviction. Those trades where you can see almost everything in your favor. When you find these opportunities, you will no longer have any fear of pulling the trigger or even risking more money. You won’t even feel the pressure to cancel the transaction if the price starts to drop.
How many times have you made a transaction and, on the first withdrawal, canceled the transaction, leaving money on the table? This happens often, and although it’s natural, Most of the time this is due to inexperience and emotionally driven mistakes..
This is why belief is important. The best traders/investors in the world do not risk the same amount of money on any given trade. They size their transactions according to their conviction in a particular idea.
Can you find these trades with technical analysis alone? The answer is no. Technical analysis is just a risk management tool. It just shows you what happened in the past, not what might happen in the future. And markets evolve based on future expectations.
You need to know what moves the asset you are trading, the economic cycle you are in, the risk sentiment regime, etc. But when you really see the ball, go for it.
Will you find these opportunities often? Hell no, and that’s why you should maximize your returns when you find them. You might be thinking “that sounds boring”. Yes it is. Good trading is not fun. There is, however, a trick to maintaining the discipline necessary to wait for good trading opportunities while increasing their number: trade different asset classes.
This way, not only will you find more opportunities, but you will also have a broad fundamental picture which might give you even more conviction in certain ideas.
Finally, keep learning, keep reading, keep increasing your experience. Don’t be afraid of mistakes or failures, because these will be the best lessons. People study for years to become lawyers, doctors, etc. Trading is no different. You’re joining an arena full of smart, experienced people, so be prepared for that.
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