Humans are creatures of habit, as the saying goes, and traders are no different. If anything, a trader is much more a creature of habit than anyone. Crossover, buy; breakout, sell; new crossover, sell; etc. We fall into the habit of looking at one thing to trigger a response for us to execute a trade or set one up for later. These habits can be good or bad depending on how out there they are. Apiary Fund reviews hundreds of trading accounts and sees good habits and bad habits alike all the time. Here are some of the trading habits Apiary Fund has seen that makes for a successful and lower risk trading account.
Always using a stop loss is a great habit to get into. Even if you are a scalper like Shawn Lucas and are always watching your trades, they can still get away from you. Having that stop loss as a just in case safety net can make or break a trader. Even if you are watching your trades, a quick movement can lose all the profits you made through the day. Having that stop loss there doesn’t mean you need to rely on it to close your trades, it's just to close your trades if they go against you faster than you are able to close them yourself.
A well-thought-out take profit:stop loss ratio can be just as important as stop losses depending on your strategy. While for a scalper you may have a 20 pip stop loss and 3 pip take profit, for longer term trades, this ratio will typically have to be more refined. One thing that Apiary Fund has reviewed in multiple accounts that does not work is a small take profit and a huge or non existent stop loss for longer term trades. While your 3 pip take profit closes almost every trade, that 100+ pip take profit will make most every win return to the market. Since the market moves a lot, most of the time you will hit your small take profit, but those times where it may take days and possibly closes due to margin call or a large stop loss will plummet your stats faster than they will ever be able to rise with that strategy. Make sure you have a closer proportion; shoot for 2:1 reward:risk.
Finally (for the article, there are many more habits you can develop to reduce your risk), always look back on your trading plan. Something that a lot of people don’t realize is that they stray from their trade plan. Small things in the market can be consciously or subconsciously picked up on and slowly start to deviate our trades away from a trade plan. This is a primary reason Apiary Fund places your trade plan on the home screen of your account when you log into the website. Some changes are good and can be incorporated into your plan while others increase loss but are thought to be part of how you trade. If you resort back to the trade plan you have written and resort if your losses are increasing or adapt if they are decreasing, your risk will fall and account grow.
Many things can go wrong in trading that raise your risks of loss. There are many things that can lower those risks though. Some vary trader to trader and strategy to strategy while others are universal for the most part. The individual habits that can be learned are the hardest typically and can only really be found through practice and trading. Incorporate general risk reduction strategies and find your own along the way. This is the quickest way to success in your trading.