The following rules should pave the way for a successful trading strategy.
Definition of a strategy
A trading strategy should be based on fundamentals that someone has personally observed or learned from the market.
Technical analysis, i.e. the closer look at price movements, is an important tool for this purpose. The market should be analyzed in order to discover recurring patterns.
Thus a strategy can be developed, after which one should act strictly.
Leaving out emotions
Traders must trade with their head, not their stomach. By nature, people tend to act emotionally. In trading, emotions are dominated by fear and greed. These should be avoided by strictly following a personal plan or strategy. Already at the beginning loss-limits should be set.
Protecting capital
Capital is a trader's tool, which is needed to make potential profits.
The size of a trade should always be in reasonable proportion to the capital.
Keeping losses small, letting profits run
A successful trader usually has a higher number of losing trades than profitable trades. However, successful trades weigh higher in absolute terms.
For example, a strategy can result in a 1% loss three times before a 10% profit on the fourth attempt. With the help of stop-loss orders or trailing stop-loss orders, losses can be limited and profits can run.
Only risking as much as one can lose
A trade should be in proportion to the total trading capital and one should never risk too much. It should be possible to make several loss-making trades without losing a large part of the capital. This also applies to the trading capital. Only as much should be used as can be lost.
Not running after the market
The market sometimes moves faster than one can implement a strategy. One should never give up the goal of a strategy after missing a move. One should sit back and wait for new opportunities.
Becoming a market student
One should study his strategies and the market regularly. Strategies must be questioned and optimized. Bookkeeping of trades to identify weak points is also helpful.
There are no gurus with crystal balls
And if they existed, they would never tell anyone their strategy!
Everyone should have confidence in his own experience and observations. People who want to give others a hot tip without being asked, should be ignored.
Caution with leverage
Especially in the crypto market there are many possibilities to trade with leverage. This means that one can trade with more capital than one has brought in. This can bring obvious advantages, but is also riskier. The higher the leverage, the faster the capital can be lost. So it can happen that one estimates the trend correctly, but is stopped out due to a countermovement and a position too large.
