10 Swift Tips for Making Money Trading Online

Although trading is not as easy as some online trading gurus want you to believe, it doesn’t have to be hard either. If we could express successful trading with a single sentence, it would be “Keep it simple but smart” (that’s also one of our tips!) 

So to keep the introduction short (and simple), here are our 10 swift tips to money trading online.

#1 Trade in the direction of the trend

One of the easiest ways to boost your account and increase your trading performance is to trade in the direction of the underlying trend. Markets like to trend, which offers an amazing opportunity for the savvy trader to join the trend and ride it as long as possible. 

Trends can be either up or down, while the absence of trends is called a ranging market or a sideways-moving market. When the market is non-trending, traders should anticipate that a strong and prolonged move is just around the corner. The most money is made by anticipating a trend before it actually happens, and traders use various tools that help them forecast an upcoming trend.

For Example
The slope of a simple moving average provides valuable clues about the current market condition. I like to use the 100-period and 200-period simple moving averages (SMAs) on the 5-minute, 1-hour, and daily chart. 

Besides the fact that those moving averages act as dynamic support and resistance levels (levels where the price might change direction), the slope of the lines also tells whether the market is trending or not. 

A flat moving average, especially in combination with a low ATR (Average True Range), can be used to anticipate an upcoming uptrend or downtrend.

#2 Stay up-to-date on market news

It’s believed that technicals discount all publicly available fundamental information, and that’s most often true. If company earnings or a country’s interest rates are expected to rise, the price of the corresponding stock or currency will often rise as a response. 

Nevertheless, it’s still smart to stay up-to-date on market news and fundamentals, as they often provide clues about the future direction of the traded instrument. 

For Example
Imagine a central bank announcement that says that interest rate cuts could be on the table. The initial reaction would be a sell-off in the respective currency. Since the overall fundamental direction is now to the downside, traders could use pullbacks or counter-trend moves to short the currency or add to their existing short positions. 

Similarly, a developing story that has the potential to send shockwaves through the market can tell to avoid trading in a specific stock or currency. 

Remember the highly uncertain Brexit vote in 2016 and the choppy price action of the British pound. Traders who pay attention to risk management would avoid trading the pound during those times.

#3 Don’t overcomplicate your trading

A common mistake among beginner traders is to overcomplicate things, don’t believe me? Check out these common mistakes made by beginner forex traders. Traders who have just got started with trading usually think that the more complicated their analysis and charts, the better the chance to make a profit in the markets. 

The truth is the complete opposite: The simpler your trading, the better your trading performance will be. Keep it simple, but smart.

When looking at charts of a beginner trader, you’ll often see the same: Messy charts with a few trendlines drawn at weird angles, a handful of technical indicators that return similar signals (like Stochastics and RSI), and sometimes a few more “individual” indicators claimed to be the holy grail on dubious trading websites. Some traders will even go a step further and develop their own custom indicators, only to see their account size continue shrinking.

The only holy grail a trader can have is patience and a well-defined trading plan. Make trading simpler by using only a few technical tools and focusing on the most important technical levels – the ones that the majority of traders around the world pay attention to. There is no use of a technical indicator that’s used only by a few traders.

#4 Don’t overtrade the market

If you want to make money trading online, you should stop overtrading the market. Overtrading refers to taking a large number of unconfirmed trade setups with way too much leverage, which is especially a problem among inexperienced traders. 

Money isn’t made by trading the markets, but by opening a trade and sitting on your hands. Time will tell whether you were right or wrong.

It can be hard sometimes to control your emotions and avoid overtrading. This is especially true after a winning streak when you start to feel invincible and think every trade you open will close as a winner. 

Unfortunately, that’s exactly the point when the largest trading mistakes are made. You stop paying attention to risk management and start opening trades that are still unconfirmed by the market.

Overtrading is arguably the single most important reason why traders lose money, so try to avoid it at all costs.

#5 Always control your risk

Just like the problem of overtrading, risk control is another field where the average trader fails miserably. In fact, avoiding overtrading can and should be an integral part of your risk management plan.

As traders, we are first and foremost risk managers. The only thing we can control is how much we are willing to risk on an idea. We can’t influence the market movements or where the price goes (well, unless you’re trading with billions.) 

Successful risk control boils down to minimizing your losses and increasing your profits as much as possible. We can’t entirely avoid losses, and successful traders know that. Losses are just part of the game, a daily business cost we have to pay. However, when we face a loss, we can try to minimize it.

Do note
Risk only a small percentage of your account on any single trade and exit a winning position only when there is a clear reason to do so.

#6 Let your winners run

The trend is your friend. You’ve probably already heard this saying before, but many traders forget it too quickly. 

When talking about risk management, we said how you should only risk a small percentage of your trading account on any single trade. We want to cap our losses, but not our profits. If a trade is going in our favour and we’ve caught the perfect entry point, we want to stay on the trade as long as possible.

There has to be an undeniable reason to close your winning trade. Many traders simply place a take-profit at a 1.5:1 or 2:1 reward-to-risk ratio, only to see the market sky-rocketing in their direction after they close their trade. This can be quite frustrating and easily avoided if we wait for a reason to close our winning trade.

Here are some reasons to close a winning position: 

  1. The price closes above/below a major trendline
  2. The price reaches a major support/resistance level
  3. There is important market news ahead
  4. The market gets hit by breaking news
  5. The price reaches the 200-day MA
  6. There is a clear sign of a trend reversal, such as a lower low or higher high
  7. It’s Friday and you don’t want to hold your trade over the weekend

Remember, we want to limit our losses, but not our profits.

#7 Create a trading plan

Trading without a trading plan is like hiking without a compass or driving in a foreign country without a sat-nav. Although it takes time to create a well-defined and detailed trading plan, chances are you already have one – but only in your mind. A trading plan needs to be written down on a piece of paper so that you’re able to grab it as soon as you feel like your trading is losing direction.

Having a trading plan just in your mind is not enough. Without a written plan, you’ll likely follow some parts of your plan, ignoring other parts, and even take trades that are not justified by your trading plan (remember overtrading?).

#8 Keep a trading journal

Hand in hand with having a good trading plan comes keeping a trading journal. A trading journal consists of journal entries, with each entry representing one trade that you have made. There can be various fields in a trading journal, such as the date and time of your trade, the market you traded, your take-profit and stop-loss levels, your realized gain/loss, as well as any other field you find important. 

The great thing about having a trading journal is that you can make regular trade reviews. Personally, I prefer to review my trades by the end of the trading day, but you can also choose another period. I re-check my entries and try to identify whether there were better entry levels, check where I could have added to my position, where should I have closed my open trades, etc.

Trading journals and regular retrospectives are a very powerful tool to fine-tune your strategy and improve your performance.

#9 Trade around key technical levels

Key technical levels are levels of major importance on a chart. A minor support on a 5-minute chart is not a key level, but a daily or 1-hour trendline that has been retested multiple times is a key level that every trader should be aware of. 

Finding key technical levels can be tough for the untrained eye, but you’ll find this to be second-nature to you after you gain some trading experience.

Learn about Technical Analysis
We’ve got dozens of free trading courses where you can learn about technical analysis. Instead of repeating lessons from our courses here, we’d encourage you to take them to learn more. Our popular ones are:

A smart way to avoid trading against key technical levels (but trade with them) is to incorporate multiple timeframe analysis. As I mentioned earlier, I use the 5-minutes, 1-hour, and daily charts to identify technical levels of high importance. 

Some traders think that the 5-minute chart is used for short-term intraday trading, the 1-hour chart for day trading and catching intermediate trends, and the daily chart for longer-term swing trading. But that’s not the case whatsoever. Each chart focuses on a different group of traders, and the interplay between them can provide valuable clues for your trade decisions. 

For Example
When the price approaches a key level on the 1-hour chart, I might look at whether this key level overlaps with a major Fibonacci level on the daily chart, and whether the 5-minute chart shows a rejection of the key level on the 1-hour chart. When everything aligns on all charts, I know I have a candidate for a trade.

#10 Backtest your trading strategies

The final tip I’ll give to you at this point is to always backtest your trading strategies before applying them in real trading. 

In order to successfully backtest a strategy, you need to have well-defined rules for your entries and exits. This also reinforces the importance of having a well-defined trading plan, as your entries and exits should be defined in your plan.

Backtesting should be performed on a demo account. If you see that the strategy produces positive returns over several months or years, you can start to apply it to your live account using low risk. Also, make sure that you’re successful with your current trading strategies before considering to add another one to your trading arsenal.

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