6 lessons I have learned in my first year of trading

When I first started trading CFDs on eToro, I was highly motivated but had no experience at all. No wonder I had to learn a few lessons in my first year of trading. I thought I was doing the right thing, when I read tons of blogs, websites and books about CFDs, trading, chart analysis, fundamental analysis, indicators, strategies and even about myself. Despite the many rules and guidelines I have read, I needed to learn some lessons by doing it the wrong way first. After learning more and more trading rules I at least managed to finish my first year of trading with a small profit. So far, those have been my most important lessons learned:

1. Focus on one goal at a time

Right after opening an account on eToro, I created this blog, simply because I have always loved the idea of blogging and in writing about my trading activities I saw the perfect opportunity in realizing this dream. And I was motivated: In the first month alone I wrote eight (8!) posts. I created statistics about my trading, I generated graphs, I wrote posts about my backtesting tool, on how I analyzed charts and gave a weekly portfolio review. In order to boost traffic I opened accounts on twitter, bloglovin and Facebook (although I never made that Facebook page public). And in times when I still hadn't found my trading style or strategy, I fell in love with the idea of creating my own trading robot. Therefore I started working with MetaTrader 5 - and even wrote a blog post about it!

Maybe I would think differently about this endeavor, if the blog and my whole social media activities were successful. Unfortunately it wasn't. It only distracted me from my original goal: Become a successful trader. Instead of focusing on this single goal at a time, I got lost in doing too many different things.

One important requirement to master this lesson is, that you actually know your goals. There were times when I asked myself, why are you doing this? I realized, that finding or defining your goals is the most important step towards reaching them. If you need some inspiration for this task, check out this guest post from Alex. It describes a tool how to find and scrutinize your live goals - very helpful!

2. Find your trading strategy

There are many different ways how to approach trading: Some traders are sitting in front of there computer all day long, opening and closing trades every minute. Others are using automated tools or focus on specific markets. You can read about swing traders, fundamental approaches, scalpers and many more. And of course it is important to get a general idea of different trading styles. But in the end it is important to find your personal way, your own trading strategy. Just randomly opening trades, inspired by different tips and strategies will hardly work. Or as the French writer Antoine de Saint-Exupery said:

"A goal without a plan is just a wish."

At one point in spring 2017 I decided to focus on trend following stock strategies. No more indices or commodities. Just get some complexity out of my thinking and because trend following seemed to fit best to my personal live and my full time job (click here for more information about my trading strategy). Quickly after this decision I realized that this was a big step, because I was more focused on that single approach. Thus I made more progress in less time than in the months before. Plus, I was ready to learn lesson #3...

3. Ignore the noise

Once I had my trading strategy, I suddenly understood what more experienced traders referred to as "noise": Trading tips on Twitter and eToro. Many traders (or writers - who knows) give tips on what to do: "By gold, it will skyrocket tomorrow", "Sell Ethereum - Cryptos are a lie and will crush!". Even if those tips were based on their strategy and were maybe a great investment tip, it doesn't necessarily fit your personal trading strategy. And once you have defined your trading strategy, you don't have to care! A personal set of rules that gives you are clear answer to the question "should I buy this?". And if the answer is "no", you can easily ignore the noise.

4. Stop predicting - start reacting

I have read this advice many times on different platforms, blogs and websites, but it took me quite some time to fully understand and embrace it. Instead I tried predicting where the markets would go, for example with my copper trading strategy. No matter how hard I tried to find indicators, candle stick patterns or chart formations, the markets wouldn't listen to my predictions. It was somehow relieving to see many other traders fail in reading the crystal ball, too. But this didn't help my trading.

It was not until I fully understood, that every trade - no matter how promising it was - contains risks that I needed to manage. Furthermore, it is much easier to use the information that is there (the price action of the past), rather than trying to predict what would be next. Of course it helps to have an idea of what the market will be doing. But instead of working with my expectation, I let the market proof my idea before I enter or exit a trade.

5. Don't be emotional

Trading is about money, and money is always connected to emotions. When you loose it you get scared, when you win you get excited. Emotions are an important part of our lives, but surely not helpful in trading. Coreen T. Sol, a Canadian portfolio manager had a great line that covers the whole topic:

"Fear is an emotion, not a stock indicator!"

It doesn't matter what you are afraid of: Missing a profitable trade or loosing money on an unfortunate trade. Trading action should not be made by feelings or emotions, but solely by trading rules, that are part of a trading strategy. So getting rid of feelings and become more like a trading robot is surely one important step to becoming successful. Applying a strategy, sticking to this strategy, analyzing the results - it is that "easy". Or as the US Journalist Charles Henry Dow once said:

"Pride of opinion has been responsible for the downfall of more men on Wall Street than any other factor."

But the lesson "don't be emotional" also has a second facet: When you are already trading with a profitable strategy, you will still have loosing trades. In volatile markets it is also possible, that a trade is closed on a stop loss way below your stop loss limit. That happened to me recently, when I had my stop loss limit on a nice profit, but the stock plunged over night. Once the market opened in the morning, my stock was sold with a heavy loss. When I saw this I felt helpless and frustrated. It took a few minutes to realized: There was nothing I could do about this.

In such situations it is important to stay cool, check the facts and continue with your trading strategy. If you need some inspiration how to stay cool in such emotional situation, I can recommend to read this blog post from a bomb disposal expert. Even if you don't like the post itself, it is easier to stay calm when you realize: Trading is "only" about money.

6. Be patient and persistent 

When you start doing something with motivation, you want to take action. You want to do something! But in trading it is often better to do nothing, rather then entering a trade just because you want to invest your money. In turbulent markets it can be hard to wait for your entry signal that is defined in your strategy and ignore the noise. In quiet times your portfolio might not move at all and you are afraid of not reaching your profit goals. In such situations, patience is the most valuable virtue. And probably the hardest one to learn.

Also on a higher level it is important to be patient. Many traders open their first trade and expect to become rich over night. But trading is not about getting rich quickly. Instead, the secret to make (lots of) money with trading is to generate profit consistently. If you manage to make a small profit every month without major drawbacks, you will eventually have a big profit after a few years. Will Smith, the famous US actor once described how he approaches his goals and I think this metaphor fits perfectly to trading:

"You don't set out to build a wall. You don't say 'I'm going to build the biggest, baddest, greatest wall that's ever been built.' You don't start there. You say, 'I'm going to lay this brick as perfectly as a brick can be laid. You do that every single day. And soon you have a wall." 

Summary

Those are the 6 lessons I have learned the hard way in my first year of trading (instead of listening to more experienced traders right away):

Further reading:

There are a lot of great websites out there, where you can learn many more lessons about trading. I can personally recommend the following posts, as they were helpful for me (but keep my lesson learned #2 in mind):

Rayner Teo: 10 Best Trading Tips You Can Learn in 10 Minutes That Improves Your Trading

Rayner Teo: 8 Forex Trading Lessons I Learned From 8 Years of Trading

Steve Burns: Ed Seykota’s 10 Top Trading Principles

Tradeciety: 5 Tips On How To Get Better And More Consistent Trading Results

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Related posts:

stock picks from intelligenttrendfollower.com that are available on eToro
Portfolio Review 01.05.2017
5 rules for successful CopyTrading on eToro

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Important remark: The results presented above and throughout my blog are no recommendation for your trading! I only share my personal findings and opinions to give ideas and let my followers and copiers know what I am currently working on. I can not guarantee the correctness of my tool and my presented results. Furthermore past performance is not an indication for future results. Only trade with money you can accept to loose!