Table of contents:
- 0.1 LEARNING TO TRADE – AN INSIGHT
- 0.2 WHAT BEGINNERS HAVE TO PAY ATTENTION TO
- 0.3 THE CHOICE OF THE RIGHT BROKER
- 0.4 SPREAD SIZE AND BROKER SELECTION FOR TRADING
- 0.5 SOURCES OF COMPETENT TRADER KNOWLEDGE
- 0.6 LEARNING TO TRADE: IT’S ALL ABOUT THE MIX
- 0.7 FURTHER EDUCATION THROUGH OTHER CHANNELS
- 0.8 TRADES FOR BEGINNERS – DEMO ACCOUNTS AS A RISK-FREE EXERCISE
- 0.9 THE BIGGEST MISTAKES OF BEGINNERS
- 0.10 BECOME A TRADER – EASY MONEY?
- 0.11 TRADES AS A SIDELINE
- 1 Learn to trade: How to get started in stock exchange trading!
- 2 Learn to trade: The practical guide with 10 videos
- 2.1 What is trading?
- 2.2 The access to online trading
- 2.3 Important trading terms you should know
- 2.4 Learn to trade: Which markets can you trade?
- 2.5 Learning to trade: What trading software / platforms are available?
- 2.6 TradingView.com
- 2.7 The Metatrader 4 and 5
- 2.8 What should you pay attention to with Trading Broker?
- 2.9 Spread
- 2.10 Swap
- 2.11 carry trades
- 2.12 Commission
- 2.13 Lever
- 2.14 Obligation to make additional contributions
- 2.15 The right start as a trader
- 2.16 So how do you start as a beginner?
- 2.17 Learning to trade: The five major areas of trading
- 2.18 Did you know that about 80% of traders fail?
- 2.19 Chart technique & strategy
- 2.20 News from the economy
- 2.21 News from the world of politics
- 2.22 Money and risk management
- 2.23 Psychology
- 2.24 Learn to trade: The Trading Type
- 2.25 The practical trader
- 2.26 The theoretical trader
- 2.27 Do you tend to gamble? Then put a stop to it!
- 2.28 Learn to trade: Swing or Daytrading?
- 2.29 Learn to trade: day trading or swing trading?
- 2.30 Which trading style is suitable for beginners?
- 2.31 Indicators in trading – makes sense, doesn’t it?
- 2.32 The trend analysis – How to proceed correctly
- 2.33 Which trends are there?
- 2.34 Is this important for your trading?
- 2.35 Resistance and Support – Support and Resistance
- 2.36 But what does this mean?
- 2.37 Different resistances
- 2.38 What happened?
- 2.39 Learn to trade: The right risk per trade
- 2.40 The Trade Management
- 2.41 Learn to trade: The trading strategy – how it’s done
- 2.42 What does a trading strategy consist of?
- 2.43 When trading becomes an addiction – FOMO
- 2.44 The Trading Plan – With structure to success
Learning to trade paves the way for lucrative investments in the financial markets. Whether shares, CFDs or foreign exchange: with the right prerequisites, anyone can make a successful start on the markets and take advantage of the high yield opportunities. With the help of some valuable tips, it is not difficult to become a promising trader and learn how to trade.
What looks difficult and opaque for laymen at the beginning is mastered by beginners with the perfect level of motivation and concentration within a few hours: Trading for beginners does not have to be complicated and is fun at the latest when first practical experience can be gained. Anyone who has always wanted to prove their skill in dealing with money should learn how to trade.
LEARNING TO TRADE – AN INSIGHT
Professional traders earn four-figure sums every day by opening and closing positions. Whether shares, foreign exchange or CFDs, the principle is always the same. For a certain amount of money, securities and assets are bought (or optionally sold) and then sold (bought) again a few hours later. In stock trading, however, the time period is usually longer. These are long-term investments, where securities are sometimes held for several years and then sold at a profit.
In the Forex and CFD area, levers ensure that the amount of money invested by investors is multiplied by a certain value. The prices of currencies, for example, usually change within a few hours only in the fourth decimal place. In order to make a noticeable profit from an investment, a high deposit is necessary. The broker intervenes in a supportive manner and ensures that private investors can make significant profits even with a capital of a few hundred euros.
WHAT BEGINNERS HAVE TO PAY ATTENTION TO
Trading beginnersFor laymen, the complexity of trading is usually very high at first glance. However, if you deal with the topic for a short time, you will quickly get an overview and can form your own picture of trading. In the course of familiarization, beginners quickly learn what is particularly important when trading. It should be noted that trading systems and strategies cannot be transferred 1 to 1 from one financial market to the next. For the analysis of the charts, some very special methods are required. The difference becomes particularly clear when trading shares in direct comparison to trading currency pairs on the Forex market. In stock trading, investors tend to think long-term and try to select the most innovative and promising companies for their investments. If the trading strategies known from stock trading were simply transferred to currency trading, this would result in devastating losses. Positions on the Forex market are usually only held for a few hours, sometimes even minutes. The profit should therefore arise in a comparatively short time. Charts and curves should therefore be read and analyzed differently.
THE CHOICE OF THE RIGHT BROKER
Be it stock trading or CFD trading: traders are only really successful with an individually tailored broker. The number of providers is constantly increasing, which in turn reduces costs and fees. The conditions must always be compared with the personal ideas and demands on a broker. If you want to become a trader, you have to immediately recognize the advantages and disadvantages of a broker on the basis of a data sheet and make a decision. To get started, however, it is sufficient in any case to make comparisons with brokers and look for a successful offer there. Before registration and deposit, the seriousness test is crucial. A broker who may not pay out the money won at all should be strictly avoided.
Decisive for the decision of trading beginners can also be special offers and promotions of the providers. For example, a one-time deposit bonus multiplies the first deposit of a new customer by a certain amount. The 300 euros paid in quickly become 900 euros. Higher capital sums are preferable when trading. Beginners should therefore compare the bonuses of those brokers who are suitable for them anyway. The decision for or against a broker should not only depend on the offered bonus. Beginners must also note that participation in such a bonus system is subject to conditions. For example, the total amount must be wagered x times in order to request a payout.
SPREAD SIZE AND BROKER SELECTION FOR TRADING
Serious providers do not finance themselves through additional fees and costs, but only through the spreads. A spread is the distance between the price at which securities can be bought and the price at which they can be sold again at the same time. If a position is opened by buying, for example, a currency, then the investor is directly in the red by a few units. This amount is the spread over which the broker finances himself.
A lower spread is always better for traders. The lower the fees, the sooner the profit zone is reached. When learning to trade, beginners should use the spread system. Professionals, depending on their individual trading style, switch to brokers who offer them fixed spreads after some time. The advantage here is the constancy, which is not dependent on the deposit value.
SOURCES OF COMPETENT TRADER KNOWLEDGE
Learning to tradeTrading is not an easy task for beginners. Sufficient information is required regarding the functioning of the financial markets, own trading opportunities and effects of messages of international interest. In addition, there are also lessons about the analysis of prices and the development of individual stocks. Trading signals must be recognized by traders. Subsequently, coordinated action is necessary, which should be second nature.
LEARNING TO TRADE: IT’S ALL ABOUT THE MIX
But where should newcomers get information in order to receive competent and above all comprehensive advice? Currently there is no specialist literature that combines all aspects of successful trading and can therefore be recommended as a stand-alone product. Instead, a mixture of reading is recommended, in which the author focuses on a single aspect at a time. In addition to texts on the psychological and mental aspects of successful trading, a basic book is therefore also required. The explanations should be detailed but easy to understand. In the best case, practical examples are given so that beginners can directly relate to reality. Traders can also try out concrete facts directly via the demo account. Every trader’s private library should also include a source of information about trading signals and trend analysis as well as possible trading systems. The authors of the technical literature should themselves already have experience and success in the field of trading.
FURTHER EDUCATION THROUGH OTHER CHANNELS
Not a fan of books and literature? If you would like to become a trader, then of course you also have other possibilities to inform yourself. In the meantime, you can find extensive collections of introductions and further texts by experts on the Internet. If it is not clear that the author is successfully active in the field of trading, then you should look for a second text on the same topic and compare the contents with each other. See for yourself.
Webinars and online courses, such as those provided free of charge by Tradimo, are becoming increasingly popular. The courses are perfect for acquiring basic knowledge. Thematically, the experts have made the distinction between forex trading, technical analysis, money management, psychology and social trading. Information on trading software is also available. For the self-test and self-assessment, what has been learned is asked again in a test.
In addition to Tradimo, other websites offer webinars on CFD trading, stock trading and Forex trading. Trading for beginners succeeds thereby mostly playfully. Against the background of the many praiseworthy offers, we advise not to spend money on online courses for trading. Very good and free information can be found for example in the article about learning to trade at einahungsbonus.org. Should more specific topics become interesting later, then this decision can be reconsidered individually. It is also a good idea to attend real courses and seminars. For the beginning, however, the offers of Tradimo and Co.
TRADES FOR BEGINNERS – DEMO ACCOUNTS AS A RISK-FREE EXERCISE
The combination of theoretical basic knowledge and practical learning is crucial for a successful entry into the world of trading. Free demo accounts from brokers are ideal for testing what you have learned directly on the real market. Every trading strategy should also be tried out risk-free via test accounts. Beginners, who repeat the procedures of their personal tactics again and again, can then intuitively unwind them while trading for real money and are therefore perfectly prepared.
Even if you are already trading with real money on the market, it does not hurt to continue the demo account. New trading systems and strategies can be tried and tested there. If you also conclude as many trades as possible, the intuitive operation will be faster.
THE BIGGEST MISTAKES OF BEGINNERS
Trading ErrorsThe typical problems of newcomers usually include a lack of technical knowledge. Without a well-ordered basic knowledge and competent overview of the financial markets, successful trading is almost hopeless and losses are pre-programmed. The trading of unprepared investors is to a large extent based solely on luck.
Newcomers also often have difficulties with their money management and financial budgeting. Regardless of the amount of initial capital paid in, betting over 95 percent of the money on a single position can have fatal consequences. There is the threat of total loss after a few seconds of active trading experience. It makes more sense to actively split the capital and invest it in different values.
The deposit amounts of beginners are also to be seen critically. Although brokers now allow participation with amounts starting at 20 euros, these funds cannot be invested profitably at all with the levers offered. Even the smallest changes in prices can cause the position to slide so far into the loss range that it is automatically closed. Even with this constellation, there is a high probability that all the money deposited will be lost after a few seconds.
Not everyone who is interested in finance and economics is also suitable for trading. If you want to become a successful trader, you have to learn to switch off feelings and emotions. One person succeeds in this better, for the majority of traders it is the biggest challenge in trading. If the emotions are not suppressed, then a small loss can lead to an uncontrolled break out of your own trading system. Positions are opened or closed that have no logical basis. Losses are then extremely likely. Learning to trade involves intensive mental training of one’s own being.
“Practice makes perfect” – this also applies to trading. Practical experience is therefore indispensable for successful trading. But don’t worry: you don’t have to use your own money for this. Brokers in the Forex, CFD and stock area provide their customers with free demo accounts for testing purposes. A short registration is sufficient, then interested parties can use the account with play money for a certain period of time and trade on the real market with real prices. Traders should use the account to test strategies as well as the operation and navigation of the software. In real trading, clicks must be made within milliseconds. The handling must be intuitive.
BECOME A TRADER – EASY MONEY?
Become a traderThe online advertising shows a very poor picture of the profession of a trader. Trading is presented as a simple activity that anyone can do from home. The chances of winning are (of course) enormously high, 800 Euro earnings per day no problem.
Promises like these cannot be kept in reality. It is concealed that the job of a trader can be very hard and every private investor must also live and deal with losses. Many newcomers do not have the mental strength to take minor and major setbacks unscathed and continue to follow the trading strategy. Nevertheless, the advertising assertions are not completely taken out of thin air. Because those who regularly deal with the subject on a long-term basis can soon achieve great success – even with a small starting capital – on their account. However, the road to this professional status is rocky and usually accompanied by setbacks.
TRADES AS A SIDELINE
A distinction must be made between professional traders who earn their living by trading CFDs, stocks and forex, and leisure traders. Who has the goal to become a trader should orientate himself at the beginning rather at the latter category and trade daily depending upon time a few hours actively on the market. There should be a fixed monthly capital, which is used for speculation in securities and foreign exchange. Traders should never resort to long-term savings deposits. The risk of a total loss, which would destroy the entire reserves, is real.
In order to build up an attractive additional income, beginners should set themselves small goals at the beginning and only aim for a certain weekly profit. It is important not to calculate in days. Trading systems only work in the long term, so that within a week, even days with significant red figures can be expected. Traders should not let this unsettle them. Even if high profits can be achieved regularly, the stake should only be increased slowly.
Learn to trade: How to get started in stock exchange trading!
So you want to learn to trade? Congratulations on this decision! However, the path to becoming a successful trader can prove to be rocky and tough. Take advantage of this free beginner’s course, which introduces you step by step to the world of trading and clarifies the most important questions.
How to get started in stock exchange trading? If you want to become a trader, you will probably start as a self-taught trader and laboriously tap into various sources to learn how to trade. What is often missing, however, is a guide that ensures a meaningful sequence of learning content.
This article aims to provide you with such a guide – either as a step-by-step introduction for trading beginners or as a reference book for advanced traders. Here you will find the most important basics for getting started in stock exchange trading.
We will guide you through the most important stages on the way to becoming a successful trader. First we clarify crucial initial questions, then we get to know the most important tools and strategies, and finally we dedicate ourselves in detail to risk and money management; after all, you and your trading account should remain in the game permanently. Also a not to be underestimated swing into the world of stock market psychology should not be missing. This will help you to get to know popular mistakes and behaviour patterns early on and to take countermeasures in good time. To further deepen your knowledge, we also recommend that you complete our trader training!
1.1 What is trading anyway?
First, it makes sense to define the term “trading” more precisely. What does “trading” mean and what is the difference to investing? If you look up “trading” in the dictionary of trust, it is translated quite neutrally as “trading”. However, this is a very broad and imprecise term. In relation to the stock exchange or “trading in securities”, one understands in principle the short- to medium-term trading of financial products such as securities, commodities, foreign exchange or derivatives with the intention of making a profit. Trading attempts to exploit and participate in smaller price fluctuations or trend phases in order to generate continuous performance.
1.2 Trading vs. investing
The transition between the disciplines of “trading” and “investing” is fluid. However, it can generally be said that investments tend to refer to those trading positions that have been opened with the intention of a holding period of, for example, 6 months or longer. The well-known investor Warren Buffett, for example, said that he only refers to his positions as real investments if he plans never to sell them again. He thus intends to receive regular cash flows in the form of dividends. Even if he partly resells investments, this usually happens in a longer time horizon.
The trader, on the other hand, tries to take advantage of price fluctuations in an underlying asset (such as a share or currency) and close out his or her trading positions within a manageable time frame. As we will see later in this article, this time window can last from a few seconds to several weeks or months, depending on your personal trading style. In order to be able to work with the sometimes small price fluctuations, a so-called lever is often used to multiply the yield that has been earned. More on this in the chapter “Which instrument do I trade with?
1.3 Why do I actually want to learn to trade?
Before the journey begins, it is helpful to answer some personal questions. The right attitude towards trading helps you to overcome lean periods and motivational recessions and to sharpen your own awareness.
So why trading of all things? Is it primarily about making money? If so, why not do an alternative job, for example as an employee? Here you get a regular salary immediately and don’t have to wait months or even years until you finally learn how to trade profitably. The argument money helps, but it will not motivate you on its own. Are you perhaps more attracted by the idea of being independent and a free person? With the possibility of theoretically being able to work from anywhere? Or to be allowed to act at the pulse of the markets? Answer these questions for yourself in a quiet hour. Please read the accompanying article “I want to become a trader” by Uwe Wagner.
2 trading tools and brokers
2.1 Technical analysis as a methodological toolbox
Chart technical analysis is a popular methodical tool for finding your way through the apparent price confusion, analysing the market situation, deriving scenarios and being able to convert them into a trade. This method does not represent a holy grail; rather, technical analysis is used by traders with varying degrees of intensity. However, one can safely say that every short-term speculator uses at least basic elements such as resistance and support zones or trend lines. Finally, it helps to be able to read and interpret a chart – a craft that will be helpful again later in the chapter on trading strategies.
GodmodeTrader offers a comprehensive guide around the topic of chart techniques. Various analysis concepts, chart types and display formats, methods for price target measurement, the most important standard tools and also practical examples are explained in detail. You can download the e-book “Der große Charttechnik-Lehrgang” here free of charge.
Christian Kämmerer deals in detail with the origin of technical analysis and describes its potential:
Requirements, assumptions and goals of chart technical analysis
Jochen Stanzl explains typical mistakes of trading beginners and shows how they can be avoided with the help of technical analysis:
The mistakes of investors – and why chart techniques and trend lines can help
2.2 Charting software and paper trading
In order to be able to make technical analyses for trading, powerful software is required with which price histories can be called up quickly and clearly, analysed and saved again for later use. It is a huge advantage if the charting software also supports hourly charts or even offers smaller time intervals (e.g. 15-minute charts, which means that one candle in the chart corresponds to a 15-minute interval).
GodmodeTrader has developed its own charting software, which is part of the trading platform Guidants. The software is especially suitable for beginners who want to learn how to trade, as trading can be done on a trial basis via a demo account (so-called “paper trading”). In addition to the usual tools such as trend lines, the software masters all important indicators, oscillators as well as the indication of trading volumes for shares.
If required, the order form can be displayed directly next to the analysed value, so that a virtual trade can be made with minimal effort. It doesn’t matter whether you want to find your way around the stock or index sector or are interested in foreign exchange trading: All strategies and markets can be tested via the demo account on Guidants. Have fun trying it out!
2.3 The Broker: What is it and why do I need it?
The Broker trades financial products on behalf of his customers. The background is simple: As a private individual, you are not authorised to place buy or sell orders directly on the stock exchange. Among other things, this is intended to ensure quality standards and guarantee more efficient markets. The broker for his part therefore always trades on behalf of third parties.
So anyone who wants to get started in trading cannot get around a broker. However, there are now broker providers that are a dime a dozen. Caution is therefore called for when choosing a broker. Under the following links you will find two articles that delve into this topic in great detail and offer assistance in making a decision.
What a broker is and what types of brokers there are, this basic article goes into this step by step: What exactly is a broker?
If you are specifically interested in forex trading (foreign exchange trading), you will find a list of important criteria for choosing a broker here. The article can also be applied to other asset classes without any problems:
How do I choose the right forex broker for trading?
If you need help in choosing a broker, try the broker comparator from Brokerdeal.de. There you will not only find the most comprehensive and detailed comparison tool on the market, but you can even secure permanently more favourable conditions.
The makers of GodmodeTrader have developed their own multi-brokerage platform called Guidants. This allows you to trade seamlessly integrated directly via a comprehensive, free stock exchange platform. You will not need any other financial sites anymore!
All you need is a securities account with one of the partner brokers connected to Guidants.
2.4 The trading platform: How about a single solution for everything? Mobile, of course.
With Guidants BörseGo AG has created an all-round solution that offers everything an investor or trader needs.
Charting, quotes, watch lists, sample portfolios, news, stock screeners, expert articles and of course the seamlessly integrated trading via the platform make Guidants unique in the German-speaking stock market landscape.
Of course, they are also mobile and fully synchronized with the desktop version.
The basic version can be used free of charge! Those who want even more features can upgrade to the PRO version.
Here you will find a link to the mini manual, which explains the most important features.
3 Implementation of the trades
3.1 How much starting capital do I need for trading?
How much money do I need so that I can start trading sensibly? This is probably one of the most frequently asked questions by beginners and it is important not to raise false expectations here. Nowadays trading is basically possible with a very small account thanks to leverage products à la CFDs or leverage certificates. If you focus on cheap trading instruments and underlyings such as indices (e.g. DAX), you will be able to trade and learn with sensible risk and money management even with a 1000 Euro account.
However, the ambitious newcomer must be aware that he will not land a big litter. Small accounts are therefore particularly suitable for learning to trade, testing initial strategies with real money and getting used to the markets. Of course, the capital can be increased later, if the trader is sustainably profitable and can execute his trading strategy according to the rules.
Just as important as the question of seed capital is the issue of capital preservation. Here is a detailed article about the 1-percent rule, which minimizes the risk of loss and ensures that a trader remains in the game over the long term:
The capital investment and capital preservation
Rene Berteit takes a closer look at the topic of seed capital and shows that trading beginners with little capital have a particularly difficult time. He explains when an account is “big enough” and on which factors this depends:
Do you trade with a small account? So you have a particularly difficult time!
3.2 Which markets or stocks are suitable for trading?
If, as a beginner in trading, you are thinking of investing or speculating, the first thing you usually think of is stocks. But apart from shares, there are many other interesting asset classes that are ideal for trading. The most important of these include bonds, currencies (also: forex trading), commodities, funds and derivatives. All classes can be traded. Of course, each class has its own characteristics and differences, for example in terms of fees or price behaviour.
If you would like to get more detailed information about the common asset classes, you will find a detailed article by Thomas May under the following link:
Where can I actually invest everywhere?
3.3 Which trading instrument is suitable for trading?
Once it has been clarified which markets are tradable, there is still the question of how the trades should actually be executed. Of course, shares can be bought or sold directly via the broker. But what about currencies, an index or even commodities? Storing an oil barrel in the basement can turn out to be a cumbersome undertaking – especially if the trade is to be of a short-term nature. Fortunately, there are derivative financial products (lat.: derivare = “to derive”) with which such assets can be traded without a high capital outlay and are therefore also available to private investors.
CFDs (Contracts for Difference) are a popular financial product for implementing trades in almost every asset class. With a CFD, you can participate in the price movement of the underlying asset at low cost without having to actually own it physically. CFDs are available on almost all conceivable underlying assets: individual shares, indices, commodities, currencies and bonds. Even trading on the short side (speculating on falling prices) is possible with CFDs without problems:
Part 1: CFDs – Basics and basic knowledge
Part 2: The benefits of trading CFDs
Tip: On Guidants you can practice CFD trading under completely realistic conditions with a demo account.
Certificates belong to the family of structured financial products and, like all derivatives, relate to an underlying asset or underlying from which the price is derived. Here you will find two basic articles on the certification jungle:
Part 1: Investment products and certificates – basics and investor knowledge
Part 2: Efficient trading with leverage certificates
Futures belong to the category of unconditional forward transactions and are regarded as the king of instruments in trading. With futures, buyer and seller commit (!) themselves to buy or sell a specified underlying asset at a specified time in the future and at a specified price. With futures, the trader only has to deposit a portion of the traded volume at any one time: the so-called security deposit or margin. Trading in futures requires a sufficiently capitalised account and is not possible with small account sizes. For more information, see our basic article “Futures” with more detailed information: Futures – Basics and basic knowledg
Options, unlike futures, belong to conditional forward transactions. Options are securities traded on a futures exchange, which give the buyer the right – but not the obligation – to either buy (call option) or sell (put option) an underlying asset (such as shares, currencies or interest-bearing securities) within a specified period and at a precisely defined price. Options are less suitable for trading for newcomers, as the pricing and trade implementation is subject to a number of influencing factors that could be confusing for newcomers. Nevertheless, here is a very detailed introductory article for those interested: Trading with option
3.4 What trading strategies are there?
The most comprehensive question in this introductory article is certainly the one about the selection of different trading strategies. After all, there are almost innumerable ways of achieving a return on the capital markets. However, it can be of enormous help to first divide all strategies into main categories in order not to be completely overwhelmed by the wealth of information when reading about trading. However, since we want to learn how to trade correctly from the beginning, here are two classifications that could save a lot of research and time.
3.4.1 Distinction according to time horizon
First, trading strategies can be distinguished according to the planned time horizon. In other words, how long does a strategy plan to hold a position approximately?
The holding period for position trading ranges from a few days to a few months. The term is therefore quite broad. If you read the term “trading” in the media in general, it usually refers to position trading. Harald Weygand provides some examples of this in this article: Three golden rules for trading beginners
Swing trading or movement trading
Swingtrading refers to a strategy that attempts to trade the next move (the next “swing”) of a value. Naturally, the investment horizon in this strategy is a few days, but sometimes a swing can be completed intraday, i.e. on the same day. Swing trading is often implemented with the market technical approach (according to Voigt). Here is an extremely detailed strategy article for trading beginners by Markus Gabel: My way to market technique
The name says it all: In day trading, trades are generally closed on the day they were opened. Of course, a day trader also uses different strategies and tactics for his trading. More on this later. Uwe Wagner has devoted a very detailed article to the most important questions that you should be aware of if you want to learn day trading.
Scalping is a subspecies of day trading. Here it is only about the realization of a few points, in the FDAX (DAX future), for example, price targets of a few or one point could be. In order to be able to generate reasonable profits nevertheless, scalpers work with comparatively large position sizes via levers. If you want to get an insight into the day of a scalper, I warmly recommend the series of articles by Heiko Behrendt:
Part 1: Successful trading setups for (very) short-term trading
Part 2: Successful trading setups for (very) short-term trading
3.4.2 Distinction by style or method
To list all existing trading strategies in detail according to their tactics or methods would of course be a sporting if not impossible undertaking. It would also miss the focus of this article, which is intended to help beginners learn to trade. Therefore, a rough, basic overview will be given here, to which most trading setups can be subordinated.
A trading signal is generated quite “late” when the price has already moved a bit in the favoured direction.
Example: Breakout trading
One acts against the prevailing market direction or in other words: one tries to be one of the first market participants to participate in a change of direction and to catch a turning point.
Example: Extreme or reverse trading or breakout pullback strategy
As the name suggests, this is not a trade in a particular direction, but rather a trade in the abrupt increase in volatility – for example, in important interest rate decisions or quarterly figures. Another well-known trading opportunity is to bet on the approach (or distance) of two different values.
Example: Market neutral strategies by Clemens Schmale
3.5 How much time do I need for trading?
Now that you have read this article and especially the different trading strategies, this question is much easier to answer: It depends on your trading style or strategy.
Logically: The scalper or daytrader will most likely need at least several hours a day to trade meaningfully. So you should be able to plan at least 2 to 3 hours for the opening or closing of the exchange.
The position trader, on the other hand, may even appreciate trading on a closing price basis without any intervention in the active stock exchange activity. He doesn’t even have to be on the market during trading hours and, for example, invests 30 minutes after the end of his regular job to screen the market and manage his trades or look for new trade signals.
Similarly, the swing trader, although he can also be found in day trading, provided he trades more intensively. But as the article “Swingtrading for professionals” by Michael Hinterleitner shows, Swingtrading – if used correctly – is also possible as a sideline without any problems.
Especially the possibility of trading part-time opens the door to short-term strategies for many beginners who want to learn to trade, as they can improve their trading skills step by step.
4 Risk and money management
Note in advance: The topic of risk and money management is so extensive that it cannot be discussed here in its entirety. GodmodeTrader has therefore put together a comprehensive and free guide, which explains in detail on 22 pages how you can optimize the risk of your trading in the long run. Click here for the money management guide.
4.1 Short introduction
How do I protect my capital as a trader? A fundamental question, because without capital you don’t trade anything. This is where Risk and Money Management (RMM) comes in and is the logical extension of the trading strategy.
Money management and risk management are always closely intertwined. Money management, however, is more about determining the size of positions. Take a look at the following account history. Both the black and the grey line describe the course of two trading accounts that were traded with exactly the same strategy – except for the position size.
It is clear that RMM is not a trivial issue and should be closely integrated into the strategy. Please take the time to look at this topic in detail. If there is a Holy Grail in trading at all, it is RMM. Here you will find three excellent articles on this topic.
Learning sustainable and lasting trading: This article starts from scratch and shows step by step and with an example how to apply RMM correctly: Basics of risk and money management
Learn all about the interplay of hit rate, risk/reward ratio and the impact of these key figures on trading. Also with an illustrative example: Basics of the hit rate
4.2 Overview of the most important order types
An order is the order that you have sent to your broker. However, the order is by no means just about the words “buy” or “sell”. There are many more order types that can be used depending on the scenario, trading style and market conditions. The most important and well-known order types are: Market Orders, Limit Orders, Stop Orders, Trailing Stop Orders, Stop Limit Orders and One-Cancels-Other Orders.
Do not despair! Thomas May has introduced all of the listed order types in detail and explains their particularities:
6 important order types you should know!
4.3 The right attitude towards trading losses and errors
The right attitude to trading losses is to never accept them, right?
Wrong! A trading strategy is nothing more than a probability-based system that ideally has a positive expectation value. We remember the chapter on risk and money management and have meanwhile read up on the topic of hit rates and CRVs: Even a trading strategy with a 40 % hit rate can generate a positive expectation value for me – if the winning trades overcompensate the 60 % share of the losing trades. But what does that mean in concrete terms with regard to loss-trades?
Obviously, I achieve 6 loss trades for 10 trades even if I trade according to the rules, although I have implemented my strategy according to the rules, i.e. correctly. It is obvious that a trade cannot be evaluated based on its result. Rather, it is important whether a prospective trader manages to consistently adhere to his (hopefully) defined trading system. If he succeeds in doing so, he will trade without errors.
As banal as this may sound, in reality it is often difficult to implement. Imagine that you have had to close the last 5 trades with a negative result, although you have traded error-free according to the rules. A series of losses that occurs quite frequently. Put yourself in this position! Do you think you can stay calm in this situation? It’s not about emotional excesses, but about the small, secret adjustments that you might make after such a series of losses without “consulting” the rules. You enter into a trade a little earlier than the signal situation allows (hope). You close an existing trade too early (greed). You suddenly test a completely new, unproven strategy. These last conceivable situations, these are now the real trading mistakes that must be avoided, because they lead to impulsive and ill-considered trading. And in the worst case you end such trading errors with a positive result and believe that you have done everything right.
To cut a long story short: This is how you secure the right attitude and protect yourself from mistakes and emotional carelessness:
- You have a detailed trading strategy
- You stick to it
I recommend the article by Normal Welz, expert in applied trading psychology, about discipline, emotion and mind.
4.4 The Trading-Journal: How you really learn to trade
The trading journal or trading diary is basically the controlling center of every trader. Imagine that you have been active on the markets for a few months, have learned the basics of trading and have already completed numerous transactions. Do you know how many trades were winners and how many losers in the past? How high was an average winning trade and what about the losers? Let’s go one step further: Is it possible to identify a pattern, which traded stocks tend to be conspicuously often losers and are there strengths to be found somewhere? Do some strategies no longer work as optimally as before?
The Trading-Journal answers all these questions – and many more. In order to advance yourself in a targeted and efficient way in trading training, you need a controlling or feedback mechanism and a meaningful database. This includes comprehensive documentation of all trades received and ideally also a short assessment and description of your emotional state. You will be surprised how positively the use of a trading journal will affect your performance!
Please read the following article by Rene Berteit: The Trading Journal
5.1 The next steps: Which trading training is the right one?
Have you made it this far? Congratulations! Or maybe you just skimmed the article and will now gradually work your way through the linked articles and enrich your trading knowledge.
Be that as it may: Make yourself aware that trading is ultimately a craft. It makes sense to become thoroughly familiar with the vocabulary and functioning of the stock exchange and trading strategies, but in the words of football legend Adi Preißler: “Grey is all theory, decisive is on the pitch”. Unlike the football team, however, the ambitious trader usually starts alone and self-taught.
Self-study is a frequently used path to profitable trading. The problem here is that it is very difficult for you to find an exchange and that you yourself are your only benchmark. I can warmly recommend you: Look around for further stock exchange and trading enthusiasts and actively promote exchange for the benefit of your own trading education. A trading community can save you years of training time, increases your motivation and enjoyment of trading, ensures regular exchanges and gives you continuous feedback on personal mistakes and progress. You can find such communities online, of course. However, if you would like to deepen your knowledge autodidactically at first, you will find in this detailed article a summary of what we believe to be the best trading books.
Tip: Take a closer look at Rene Berteit’s trader training. You will learn how to master trading in a professional way!
Learn to trade: The practical guide with 10 videos
Hello, dear trader and welcome to our great guide for trading beginners. We will guide you with your first steps towards professional trading. In order to make your start as easy as possible, our contents are kept very practical.
What is trading?
Think of trading as an active trading with a product. You buy at a certain price and then hopefully sell more expensive. The only decisive criterion for you is the profit or unfortunately also the loss. You also do not keep any of the traded products and finance yourself from the constant back and forth.
For example, if you invest in a share, you buy it at the lowest possible price and keep it for a comparatively long time. You try to build up a portfolio of many different securities, which will be worth more and more in the long run. So you have different shares in your account with their respective market values.
As a trader we do not care which product is traded. Shares, gold, foreign exchange, etc. everything is possible and more about this later. More interesting for the trader is the strongest possible movement in any direction. Yes, right! As a trader you can bet on rising but also on falling prices. Only the movement is decisive. At the end of the day, the trader’s account will always have Euros, Dollars, etc. in it, but no securities.
Trading is therefore the active and comparatively short-term trading with a so-called asset. You can bet on rising or falling prices. At the end of each trade only the Euro value remains on our trading account and we do not keep the traded product.
The access to online trading
In recent years, the digital achievement has changed a lot in online trading. It has become faster, easier and also cheaper. A personal call to your broker is no longer necessary. There are countless platforms and apps for your mobile phone and every interested party can start trading immediately with just a few clicks.
Advantages compared to the past …
- Significantly faster execution of your trades
- Reduced fees
- Wide range of instruments
- No more phone calls necessary
- Real-time execution
- You can automate processes
Disadvantages compared to the past…
- A wrong click can be expensive!
- Training time is necessary
- Many beginners overtaxed at the beginning
- You lose touch with your capital faster
We consider this development to be positive. The start has become easier and also much more pleasant. However, it also allows much faster trading, which is not necessarily suitable for beginners.
Every online trading platform offers a so-called demo or also paper trading. This is a fictitious account with a fictitious capital, which you can use for testing. Get an impression of the respective provider and use search engines for more information about the provider.
Important trading terms you should know
So that you can always follow us in the further course, we give you here a few important trading terms but also special features on your way:
Long: A rising price trend.
Short: A falling price trend.
Range: A lateral price trend.
Asset: This refers to the product that you trade and enter in the search bar of your broker. (EUR/USD, DE30, XAU/USD, DJ, etc.)
Order types: A distinction is made between immediate execution (market) and waiting execution at a certain price (limit, stop).
Stop Loss: This is your most important trading tool. Once you have opened your positions, you set your maximum risk with the Stop Loss. If the price goes against your expectations, the trade will be closed automatically when you stop. This way you avoid further losses and you don’t have to sit in front of your computer all the time.
Take Profit: This is a so-called limit order that you can use to realize profits when you have an open position. When the Take Profit is reached, it closes your open trade in profit.
Lot: This is a size in trading. You can compare it to, for example, kilograms, meters or liters. It describes a fixed number of a product.
- 1 lot = 100,000 units
- 0.1 Lot (Mini Lot) = 10,000 units
- 0.01 Lot (Micro Lot) = 1,000 units
Candlestick display: A variant of how you can have a price history displayed. It is also our preferred representation for the further course of this guide
Timeframe: This defines the interval for your e.g. candlestick display. Hour, day, week…
Learn to trade: Which markets can you trade?
One thing in advance: Almost everything! Whether you want to trade stocks, gold, foreign exchange or even crypto currencies, the choice is gigantic. Every broker offers you a large basic selection of tradable instruments.
Mostly the following markets are offered:
- Forex (e.g. Euro / Dollar)
- Commodities (e.g. gold, oil)
- Indices (e.g. DAX, Dow Jones)
- Stocks (e.g. Tesla, Apple)
- ETFs (e.g. iShares Core DAX)
- Bonds (e.g. Germany Bund Future)
- Crypto currencies (e.g. Bitcoin / Dollar)
Almost every market can be traded in one way or another.
Select the instruments according to interest and, if necessary, previous knowledge. There is no point in trading markets with which you have no connection. You should also not actively trade more than 3 – 5 assets.
Learning to trade: What trading software / platforms are available?
There are several different programs that allow you to trade sometimes complex, sometimes simple. Since this guide is aimed at beginners, we assume that you will start as a CFD trader for the rest of the course.
The trading tool of the future. We are now absolute fans of this site and the accompanying chart software. At TradingView you will find absolutely every market you will ever need. There is no need to install anything on your computer and you can use it with your mobile phone, laptop, tablet and PC from anywhere. The presentation of the markets is very clear and leaves you all drawing freedom. We also have a manual for this great program: Click here to learn more.
We recommend TradingView! A great platform on which you can not only find all markets, but also exchange with other traders. You can share your analyses or get ideas from others.
The Metatrader 4 and 5
This software is probably the best known and oldest on the market. Currently you get a connection to the Metatrader 4 or 5 at every CFD Broker. It is a solid software which you can also use on your Smartphone and tablet. We have created a complete Metatrader manual for you: Here you can learn more.
What should you pay attention to with Trading Broker?
So that you can trade on the stock exchange, you need a solid and reliable broker. You find many tests to the most different providers in our blog. We also do not want to make an explicit recommendation.
Rather, we provide you with a Broker Checklist with the most important points and terms:
This is the first fee you have to pay for each trade. Each time you enter, your position will be briefly in the red. This is perfectly normal, but you should know that the spread is different. There are exotic assets that cost a lot of fees. Your broker must inform you about this and give you these spreads in advance. The best way to do this is to write directly to the relevant customer service.
These costs are incurred if you wish to hold a position for several days. On each new trading day, a usually small amount is deducted from your position. How much these swaps are depends on the broker and the asset.
There are currency pairs in the Forex market where you get a small positive dividend. How high this dividend is, however, depends on your broker. Read more about carry trades here.
Your broker deducts a proportion of your profits. The Metatrader for example always shows you these fees. So you can see what was debited to you and the amount the current trade is calculated on.
It is also to be understood as an actual lever in trading. It enables you to trade a high volume with a small stake. Since the last ESMA regulation, all European clients receive a maximum leverage of 30:1. How high the leverage is depends on the broker and the respective asset. To give you a better feeling for this topic, here is a short example:
You would like to place a trade in EUR/USD (EURO/DOLLAR) with 1 lot, i.e. 100,000 units on long (rising price).
Without leverage you need at least 100,000 € on your account for this trade.
With leverage (30:1) you only need 3333,33 € for this trade!
The leverage does not change your position size, but reduces the necessary capital. The higher the leverage, the less capital you need for a trade.
The adjustment of the levers was not without reason! Many brokers advertised with a leverage beyond 300:1! What sounds tempting is in the end not good for the trading beginner. The money was simply gone much faster. Are you toying with the idea of using a broker who offers higher leverage? Then you should know that this is against the law of ESMA and that you only have disadvantages. Such brokers usually have fraudulent intentions and it will be almost impossible for you to get your deposit back.
Obligation to make additional contributions
Imagine you have a trade open. You are well in profit and have already hedged the stop loss in a positive direction. It is Friday and you decide to hold the position.
Now something political or economic happens that immediately affects your asset.
As a result, the price jumps immediately upon opening and your stop loss is executed much too late. Moreover, you were bought in with a much too large stake. You take a look at your account and see a negative number. If the obligation to make an additional payment still existed, your account would not only be zero, but you would even have to pay more!
This feature no longer exists and you can fall to zero at most. An additional payment by the broker is no longer legal.
CFD trading is much more regulated than five years ago. Do not let yourself be tempted by high levers and abstruse promises. Great conditions do not bring you anything if you do not get your capital back.
The right start as a trader
We have now laid all the elementary foundations and can now deal effectively with the actual trading. It is important to us that our knowledge is as practical and above all honest as possible. In the following you will find a webinar of at least 30 minutes for each area. A webinar is a live broadcast in which many participants have asked questions. Therefore the content is uncut and unembellished.
Trading must be learned properly:
See trading on the stock exchange as a normal training profession. You would apply as an apprentice and then go through two to three years of training. During that time you would simply have to perform stupid tasks. You earn little and it is definitely not easy! But you know that you will do it for the time and the salary after the training.
Why should it be different when trading on the stock exchange? Get rid of the idea that you can learn everything you need to in a few months.
YES, there are exceptions, but these exceptions confirm the rule!
So how do you start as a beginner?
It is like everything in life, starting, falling down and getting up. In stock market trading it is absolutely the same principle, it hurts twice. On the one hand, you have to admit to yourself that you have done something wrong, and every mistake costs you money. This is exactly where we start with our guide!
Goal: We want to save you from total ruin and give you a clear structure!
You now know our goal, and to make it even more effective, we need a plan. So let us start with it. Trading is not witchcraft and basically consists of five major areas:
Learning to trade: The five major areas of trading
We will now follow this pattern step by step and discuss everything relevant.
Did you know that about 80% of traders fail?
See trading on the stock exchange as a normal training profession. You would apply as an apprentice and then go through two to three years of training. During that time you would simply have to do stupid tasks. You earn little and it is definitely not easy! But you know you are doing it for the time and the salary after the training.
Why should it be different when trading on the stock exchange? Get rid of the idea that you can learn everything you need in a few months. YES, there are exceptions, but these exceptions confirm the rule!
See trading on the stock exchange as a normal apprenticeship. You would apply as an apprentice and then go through two to three years of training. During this time you would simply have to complete stupid tasks. You earn little and it is definitely not easy! But you know you are doing it for the time and the salary after the training.
Why should it be different when trading on the stock exchange? Get rid of the idea that you can learn everything you need in a few months. YES, there are exceptions, but these exceptions confirm the rule!
Chart technique & strategy
You have already learned several important basics and are now ready for the next step. With the chart technique you look at the past course of a course and infer future opportunities.
A totally logical consequence of this first statement is that you never trade in extreme zones. In order for the chart technique to work, you need a past history. However, this also implies that you are not trading in areas where the price has never been. If any price trend is at an absolute high or low, then you are not trading here!
Many beginners, but also advanced traders, forget one elementary thing: It’s all about the price!
Each chart shown is nothing more than asking the price with a time course. Just like everyone of us knows it from school: the X-Y coordinate system! The price is applied on the y-axis and on the x-axis the always same time step. No matter how intensively you deal with the chart technique, never forget that it is all about the price!
News from the economy
A very controversial topic in trading! How do you best deal with economic and political news? This cannot be answered in such a sweeping way at first, as it is very extensive. As a beginner, but also an advanced trader, you should not trade on news. Of course you should inform yourself when important decisions are made, but you should not simply place a trade on a flashing number.
News from the world of politics
Here the problem already starts! In the rarest cases you can foresee such news. Be it a tweet from Trump or a sudden escalation in the Middle East. Such incidents have a massive impact on the most diverse markets. Your only remedy is sound risk management.
Money and risk management
This is the most important part of trading! It determines the amount of your losses but also your profits. The longer you trade, the more you will appreciate this part of trading. You should consider the following for each position:
- How much do I want to risk for this trade?
- Where are the achievable goals?
- What is a plausible risk?
- What do I do if the trade develops positively?
The technology behind trading on the stock exchange is not difficult. There is no holy grail and there is not one strategy. You need discipline, perseverance and ambition! If you start trading today, in a few years you will find that it is actually not that difficult. However, you will also find that you have not followed your own rules.
- You have not kept to your setups.
- You have not followed your money management.
- You have made trades on instinct.
- You have taken far too high a risk.
Yes, that’s all part of it! However, you will find that the real hurdle in trading is not the one perfect strategy. It is the psychology! Work on yourself and your setups. The markets are extremely effective and do not forgive any mistakes. Only when you are in control of yourself will you make money trading.
Learn to trade: The Trading Type
How you approach the above areas plays a decisive role. From experience we can tell you that there are basically two different types of traders. It is crucial how you deal with mistakes and whether you can gain insight from them.
The practical trader
Here is the name program! It is simply started directly, an account is opened and money is deposited. Without much foreknowledge it starts directly and the first positions are set.
It is these traders who learn right at the beginning that the markets are extremely effective and can be brutal. They usually lose their relatively small deposits a few times and then either give up or start over.
Practical traders are mostly self-taught and learn from their mistakes. They can already build on experience and support your insights. Practitioners don’t spend too much time with subtleties and want to start directly instead. One of his greatest strengths is a very steep learning curve and the gift to concentrate on the essentials.
Sayings such as “… This is all fraud and does not work anyway!” usually come from such trader types. A logical consequence! They immediately started trading with real capital and without any previous knowledge. A loss was absolutely inevitable. Many give up after the first setbacks and stamp the trade on the stock exchange. One of its major weaknesses is usually the lack of discipline.
The theoretical trader
Actually, this type is now easily explained, because it is virtually the complete opposite of the practitioner. Such a trader considers countless times and plans everything in detail. Mostly he stays in demo accounts for years, afraid of making mistakes. Also, the theoretical trader will usually make far fewer trades than the practical trader.
They usually lose very little capital and plan each setup very carefully. They are a walking trader encyclopaedia and can rely on an enormous amount of knowledge. Their greatest strength is their discipline and structured thinking.
Often such traders cannot see the forest for the trees. They find it difficult to apply the mass of knowledge and think each trade “dead” hundreds of times. They are often accompanied by fear and uncertainty.
Of course this classification is a generalization. However, it very often applies and we are sure that you too can assign yourself to a type. Of course there are overlaps and that is not bad at all.
With this enumeration and differentiation we want to encourage you. Every beginner faces more or less the same problems. No professional falls from the sky and you don’t become a professional after two months. However, the above examples should help you to recognize yourself and your strengths, but more importantly, your weaknesses. Be aware of them and make sure you work on them.
Do you tend to gamble? Then put a stop to it!
Are you annoyed because your setups work, but you never open a position? Then trade with 0.01Lot and get started!
Learn to trade: Swing or Daytrading?
You’ve heard these terms before, but don’t really know the difference? This is no problem! Swing or day trading describes your trading style. So how you proceed and how long you keep a position open, for example.
Thanks to YouTube, Facebook and the many advertisements, day trading is the most popular trading style. Several positions are opened and closed in one day. The important thing is to move as much as possible in a short time.
In swing trading you usually open several positions per week and hold them for days or even longer. As a Swing Trader you place more emphasis on the actual management of the individual positions.
Learn to trade: day trading or swing trading?
The shortest trading method is called scalping. Here you are only bought in a few seconds or minutes and take the smallest price movements with high stakes. The absolute opposite is the investment. You buy shares, for example, and hold them for many years. Swing and daytrading differ of course not only in the holding period. The time frames are also fundamentally different.
Day trading: M30 – H4
Swing Trading: H4 – W1
This in turn influences your setup, your goals and most importantly, your risk management! Note: The higher/larger the timeframe, the smaller your stake size!
Which trading style is suitable for beginners?
Let us use the information we have already discussed. Day trading is much faster and also more quantitative than swing trading. You would therefore have to plan more setups, implement more and also monitor more. Not to mention the psychological strain.
So our recommendation to all trading beginners is clearly swing trading. It can be better integrated into everyday life and your professional life. Due to the high timeframe, you have fewer entry signals, but you can plan them much more precisely.
The learning effect from each trade should therefore be higher and the risk, greed and “over-trading” should therefore be lower.
Indicators in trading – makes sense, doesn’t it?
Sooner or later you will come across technical indicators. It sounds tempting to be able to automate certain processes or even to get entries without your own analysis. But the reality is somewhat different: Technical indicators are rather unsuitable, especially for trading beginners.
Imagine an indicator in trading like a navigation device for your car. An absolutely practical thing that makes your everyday life much easier. But now imagine that you cannot drive a car. Clutching, shifting gears, flashing, etc. must first be learned and intensively practiced. Only with a Navi you will not get from A to B!
Even an indicator will not make driving easier for you, at least not yet.
Advantages of technical indicators
- Automatic monitoring of courses
- Confirmation of your own scheduled setups
Disadvantages of technical indicators
- They only work in the respective areas for which they were created
- Each indicator has its own errors
- Trading with indicators alone is very ineffective
Example: One of the most popular technical indicators is the moving average. Here, the defined periods are added together and an average value is calculated. This is then visualized on the chart. Depending on how many periods you enter in the calculation, the more the line deviates from the current price trend. You could use the moving average with a period of 100 in the daily chart as a kind of “trend indicator”.
However, the calculation of the moving average is the following! This means that the chart is only visualized when the current candle is closed. So you are always running after the price and you will not find entries like this.
The trend analysis – How to proceed correctly
Let us now start with the first part of the chart technique and a direct practical area. If you want to learn to trade, this is the first big step! What is actually a trend in trading? In principle, prices can rise and fall. The long-term movement of a price in a certain direction is now defined as a trend.
Which trends are there?
The Long Trend: Prices rise! You regularly see higher highs and higher lows.
The short trend: Prices are falling! You regularly see lower lows and lower highs.
The lateral (Range) Trend: Here the price moves sideways along the X and time axis. There is usually a constant change of candles between rising and falling.
Is this important for your trading?
Yes, definitely! In order for you to earn money by trading, it is essential that you move as much as possible in the direction you are trading. If you bet on rising prices, then of course you want a long and strong rise. With falling prices, the same thing only in the other direction. What you do not want are range trends. Here the price runs sideways and has no clear direction. So there is not enough movement to make profits. Worse still, swap fees are regularly incurred.
Another very important characteristic of trends that you should keep in mind:
“It is more likely that a trend will continue in its intended direction rather than completely reversing.”
For you and your trading, this means that you should always try to trade in the trend direction. Unfortunately, it is not as simple as it sounds!
A basic method of the chart technique is “testing backwards”. In doing so, you look at the past and deduce future reactions. There is a similar procedure especially for trend analysis: If you trade D1 in the daily chart, for example, then you start with the trend analysis in the superior timeframe, in this case the weekly chart is W1. Now look at the course of the price and analyze any existing trend. Then switch down to your actually preferred timeframe, i.e. D1. This procedure ensures that you do not accidentally trade on a correction and thus against the actual trend.
Resistance and Support – Support and Resistance
This is the best and most important tool of chart technique. There is no setup where we do not use this technique! In order for you to better understand our point of view, we need to take a step back. You have already learned that the price can show a trend. For example, over a longer period of time the price rises or falls.
But what does this mean?
Actually, you apply a price to a time course, just as you know it from the X-Y coordinate system from school. The x-axis is the time axis on which you jump one step at a time = timeframe. On the y-axis you enter the actual value of the product or, in other words, the price.
This results in a diagonal course, which we generally refer to as the price course. Many traders forget a crucial basis: It is only about the price!
The only important component is therefore the y-axis. This is exactly where the great strength of the resistances lies: Imagine it actually as a kind of obstacle to the price of any product. The price rises and at a certain price level there are many sell orders that keep the price below this sell price.
Imagine any share in front of which we now give a fictitious price of 80 € unit price. The current market value is still in the normal middle field, i.e. far away from the absolute high and low of the share. The upcoming quarterly figures are slightly better than expected and the share price is beginning to rise. You decide to buy a few shares for let’s say 83 €. Your shares perform well and the price continues to rise.
Now here’s what happens: The price climbs briefly to 102 € and then begins to fall sharply. Unfortunately, you see it too late and sell panically at 86 € per market execution.
But why? On the price of about 100 € there were many sell orders from large market participants. These were filled when the price reached them and an immediate reaction followed = resistance
You now know in principle what resistors in general are. However, there is a small but fine distinction that you will need later in this guide. Think back briefly to our example with the share: We assumed that it rises and bounces off a price zone. However, this consideration now also applies to falling prices. In principle, the same thing happens only from a different perspective.
Example: Our share, which you bought at 83 €, now starts to fall directly for inexplicable reasons. You have not set a stop loss and now you hope that this short movement will correct itself again. You have already written off the trade when your share touches the zone around 59 €. Now finally follows a strong long movement and you can close your trade with minimal loss.
The share price has touched an important zone where many buy orders were placed. These were executed and the price jumped accordingly long. So the zone has slowed down the stock and supports you to rise again.
On the basis of our two examples, we now distinguish between two different zones:
- Prevent the share price development = Resistance
- Support the course = Support
Now you have to be careful not to confuse the terms. In principle, the general term for relevant price zones is still “resistance”. So if you are only interested in identifying and analyzing certain zones, then stick with it. However, if you look at these zones in relation to the trend of the price development, then you need this new differentiation. You should definitely take a look at our webinar, as it contains very important information.
Learn to trade: The right risk per trade
Risk management is the most important area if you want to learn to trade.
All the knowledge you have gained so far is based on theoretical planning. So whether you want to trade with or against trends, for example. Whether your setup is qualitative and whether the resistance holds?
In order for you to be able to implement your trade, you now need two areas in your money management.
- Risk per trade?
In principle, the risk per trade should never exceed 1-2 % of your trading capital.
Capital on your trading account: 10.000 €
Risk at 1 %: 100 € per trader
If the StopLoss is reached, you will lose a maximum of 1% or even 100 € in relation to our example.
Whether you will lose 0.5% or 2% per trade depends on the quality of the setup. Please go through the following list:
- Plan the setup against or with the trend
- Is the price trend to be considered qualitative
- How “safe” is the entry
- Is your profit zone achievable
The Trade Management
This is now the decisive step towards opening your trade! So far you have planned your setup, estimated the upcoming news and decided how much risk you want to take.
The next step is to plan your StopLoss position and your first profit zone. Your variable is the bet size. The bigger the StopLoss is removed, the smaller the bet size.
StopLoss in 100 pips distance: 0.10 lot
StopLoss in 200 pips distance: 0.05 Lot
A doubling of the StopLoss distance therefore results in a halving of the bet size.
Learn to trade: The trading strategy – how it’s done
The trading strategy can be defined as a pre-defined process, under certain conditions. This process determines how you should behave in certain price situations and whether or not you should open a position. It is best to define the following in writing:
- What trading entries are there?
- When do I open my trade?
- How do I open the position?
- Which timeframes do I use for the implementation?
- How do I deal with the open trade?
What does a trading strategy consist of?
1 the setup
- Is there a trend or is the price moving sideways?
- Can qualitative resistance be identified?
- When do you open the trade?
- How do you open the trade? By limit or immediately?
2 the money management
- Is the price performance qualitative, so does it have a trend?
- Do you trade with or against the trend?
- How much risk do you take for this trade?
- How long do you want to keep the position open?
3 trade management
- Where do you effectively invest the stop loss?
- When do you re-draw the stop loss?
- Where do you take profits?
- How do you react to news?
4 the trading psychology
- How do you behave during the open position?
- Do you follow your rules?
- Avoid “loss framing”
- Avoid “Over Trading”
When trading becomes an addiction – FOMO
Trading can also be quite addictive. The fear to miss something or also called FOMO = fear of missing out is a big problem especially for beginners. You can’t get rid of the feeling that the movements come as soon as you move away from your computer. At the beginning trading has a similar influence on us as gambling. It is quite addictive!
Please always be aware of this characteristic. As a trader, you are not a gambler at the slot machine and do not hope that finally the right light will be seen.
From the very beginning, put a stop to it and set yourself strict rules. Furthermore, we recommend that you start again at a timeframe higher than H4. It takes away the speed of trading and you will make less critical mistakes.
The Trading Plan – With structure to success
You now know all the important basics you need and can now learn to trade effectively. Make a plan and stick to it. Keep the following areas to yourself:
- When and how does trading fit into my everyday life?
- How much capital do I have available? Am I dependent on it?
- How do I start with the analysis?
- What news is important?
- How qualitative is the setup?
- How much risk will I take with the position?
- How do I behave when the trade is open?
- What are my personal rules?