Does it sometimes occur to you that you analyse the charts, see a suitable trade setup according to your strategy or trading plan, but then all of a sudden feel uncertain and hesitant to enter?
Luckily, there are methods and tips that have helped boost my confidence when analysing and trading the financial markets. I hope they will help you as well.
This article discusses my nine best tips for boosting your confidence sky high.
1) Apply Solid Trading System
Trading systems are important because they offer a blueprint of how to trade the chart. Trading systems tackle many key questions, such as:
- How to analyse the instrument
- How and when to enter
- How and when to exit
- How and when to manage the trade
- When not to enter
By using a trading system, I feel more confident about major and minor decisions taken from start (analysis) to end (exit).
2) Learn to Analyse the Market Structure
Trading systems are important, but sometimes, they lose their long-term edge when trends reverse or price patterns change. My solution is to analyse the market structure and apply analysis ( technical, wave, fundamental).
First of all, what is market structure? In my opinion, it means the following:
- Support and Resistance (S&R)
- Trend and momentum
- Chart and price patterns
I am better equipped to read the market accurately when analysing the chart with the help of these three concepts.
Source: EUR/GBP weekly chart from June 2015 to August 2017, MT4 Supreme Edition, showing uptrend (blue arrows), resistance (orange trend line), and patterns (triangle – green and orange line).
3) Trade with Acceptable Risk
Feeling anxious or nervous when trading? It could be caused when trading with high levels of risk.
All traders have a tolerance zone for risk. Once you exceed that comfort zone, it could impact your decisions and analysis negatively due to the fear of losing and missing profits.
4) Test 50 Trades with Low Risk
Trying out a new trading system? Usually, a trader's confidence will fluctuate depending on the results of the last few trades.
A trading approach, however, should be focused on its long-term viability. Traders need to first measure their success rate with a system, which is why a test period of at least 50 trades is needed to provide more data.
I think it's better to start testing a system with a bit lower risk or even on a seriously approached Demo Account because it builds experience and confidence.
5) Be Flexible and Learn from Each Trade
The best approach to trading is to follow the markets lead. I try to be flexible and follow the price's path of least resistance by joining its anticipated direction, rather than trying to outsmart the market.
Every trader has a little bit of bias when analysing the market, such as confirmation bias or contrarian bias. Fortunately, each trading day, week, month and even year provide a moment to learn and improve.
6) Feel Positive and Forget Past Mistakes
Traders can and should learn from their mistakes, but then, it's time to move on. Why? I do not want past errors or bad trades to cloud my judgement or make me feel negative.
For me, it is important to retain my focus on the current trading decisions and not get distracted by trades from the past. Learn, move on.
7) Document Statistics and Evaluate
Keeping track of your trade statistics helps with seeing the bigger picture. It is also important to do regular evaluations of your trading, for example, once a week. This will help you analyse your past performance and understand very clearly where you can improve.
8) Accept the Uncertainty of the Market
Trading will always remain a risk. Nothing is certain, and there is no guarantee of any outcome, no matter how well a trader prepares or analyses the charts.
The market will do what it wants, and there is nothing traders can do about it. Traders might be less prone to feel insecure if they accept the fact. In my view, a trader's main and number one concern is whether they are following their trading plan or not.
Source: GBP/JPY 4h Chart from 6 July to 18 August 2017, MT4 Supreme Edition
9) Don't Miss Our Live Webinars and Analyses
Interested in trying out a Demo Account? Try out the live market conditions risk-free!
Admiral Markets are always eager to support you with:
- Access to the markets with very low fees;
- The best technology on the market – MetaTrader 4 Supreme Edition.
Cheers and safe trading,