Basic Concepts

Inexperienced traders frequently forget a very important topic when they build their first trading plan. Yes, we are talking about the “money management” chapter.
We don’t blame them, because sometimes they even clearly know the difference between management or “technical management” and the referred “money management” concept.
When we refer to “technical management” we are talking about the set of technical rules and technical routines with the specific objective to manage an existing open position. When we refer to “money management” we are talking about the set of rules and policies related to preserving capital and profits during a larger period of time.
Money management is always referred to a larger period of time, for example, the current trading session, the current trading morning, or the current trading week period.

Technical management is referred to a specific trade and only to this unique trade, it doesn’t matter which trading time frame we are talking about, minutes or seconds or days or weeks. I manage that trade and only this. Once we close it, for example, another trade could be taken and another technical management will be executed for this new open position.
But we need to know how to manage the first trade profit or loss, and the same situation after taking a second trade in order to protect my today’s profit and my existing capital.
For example, if I have two or three winning trades in a row, we have to previously know how to manage those profits. Do I need to stop my trading because I got three winners in a row? Or I will stop my today’s trading depending on how big my today’s total profit was?
What about 2-3 losing trades in a row? The same question must be answered.
You need to define and rigorously write your “ money management” chapter.
TradingTotal created a whole money management module as a part of our automated trading systems and those money management rules are a good start for your “ money management” chapter as a part of your “master trading plan”.

You probably already heard that you have to be focused during the whole trading session. Let me tell you that you have to be focused not only during your specific trading period. You have to be focused before your trading session, during your trading session, and after your trading session.

All these periods must be covered in your trading plan. There is no problem because you do have a trading plan, right? Or don’t you have it? Oh, you have it but you didn’t finish it!

If you don’t have a complete trading plan, you cannot even think about trading. The only way to stay focused is to clearly define what you want to trade, when, and how.

How can you be focused if you don’t know what actions you have to do? I think you already understood.

Once you write your trading plan, all the chapters, and all the sub-chapters, you have to carefully study your plan and to execute it during your trading activity.

The only way to be profitable in this business is to have a plan and stick to your trading plan 24 hrs. a day. You have no excuses.

TradingTotal can help you build your trading plan to achieve your goals!

Ask for a private interview with your TradingTotal Educational counselor. Do not wait till tomorrow, do it now! Send a message to admin@tradingtotal-usa.com

After so many years teaching technical trading to hundreds of traders and investors as well as coaching and mentoring active traders, let me tell you what I learned and obviously, what I always try to teach to our TradingTotal students: The most important thing is to provide and transfer the necessary knowledge and experience to help traders to discover how they are happy as traders, to help them to find their “comfort zone”, their “sweet spot”.

This process implies defining the trading style, the type of instruments to be traded, and the trader’s risk profile, according to every particular situation in order to create a self-confident trader very happy to wake up early in the morning to start his/her trading activities.

Educators can provide tons of technical analysis information and theory but if you can’t contribute to clarifying the immense number of options or possibilities faced by the new trader in order to decide what to trade and how to trade, all the transferred knowledge will be completely useless.

Of course, you need to learn a lot of trading techniques, and you must practice and test those concepts in a realistic environment to evaluate yourself with the educator’s collaboration. But, what we are trying to explain is that your educator must always evaluate if the provided education focused on a certain type of trading is the best option for you.

I would like to contribute with my specific experience giving you some tips in order to find your “comfort zone”.

– Never accept what others are doing/trading as the best option for you

– Try to find out how you manage frustration, and how you manage losing trades during your learning and simulation phase. In real life with real money, it will be probably worse.

– Try to discover how the size of a loss actually impacts this frustration, trying to determine the dollar limit for a comfortable losing trade, at least during the initial stage of trading. This limit has obviously a real psychological–emotional component but it also has an objective financial component directly related to your “financial shape” mainly formed by the financial independence you have in terms of “pain resistance” and “opportunity cost”. Believe me, that is a key factor that can literally kill your future as a trader if a mistake is made.

In other words, you must answer two questions:

Can I live without earning money from my trading activity for at least one year without using my trading capital for other purposes?

How do I feel if I lose 25%-30% of my trading account due to an improper trading plan execution?

Your training period and your simulation process will tell you a lot of things about your ability to manage emotions, and what type and style of trading makes you happy. Nobody can take control of your decisions. It’s all about you, but at the same time, there is no doubt about the importance of having a skilled and experienced tutor to help you.

The beginner trader faces a huge inexperience on handling two feelings that determine the emotional state in trading: fear and greed.

Facing these two strong and influential emotions, it is essential to have a plan to avoid their influence in their actions. The only way to control both emotions is with the determination and execution of a careful trading plan that includes, in its first considerations, all the aspects that determine and confirm our participation in a given trading position and the fixing of the consequences that will make us abandon the position, once we have entered it.

It is about the determination of what is technically denominated: The entrance point and the possible exit points.

In relation to the entrance point, this will be cautiously determined based on a technical criterion that include pattern analysis of the action that we are considering in its synchrony with the Market if it is necessary, time frames, reversal times, reward-risk relation, etc.

This aspect is studied and discussed in detail in our TradingTotal Course in such a way that our trading students will learn to “pull the trigger” without any kind of hesitation or fear when the moment arrives.

It is almost universally recognized that the right execution of the entrance in a trade is one of the most important parts, if not the fundamental, for the achievement of a successful trading.

An inappropriate entrance can affect the trading result, transforming it from a potentially successful operation in a losing trade or in the best case, in a trading with a poor result, in terms of profit.

In relation to the trading exit points, we must assume them as our exit through the door or the trade’s triumph as well as the possible exit through the emergency door if this doesn’t go as we had expected. Both exit points are denominated: objective points and losing point, accordingly.

When the beginner trader studies price graphics in different time frames, the market, the internals, the sentimental indicators, etc. and concludes that it is the high probability pattern he was looking for, having chosen a certain strategy in a given time frame, and now he is placing his fingers on the mouse, he must acknowledge that a certain probability that this “perfect” pattern (which by the way, doesn’t exist and you know it) doesn’t  develop according to the trader’s expectations exists .

So before clicking the mouse, the traders must determine technically up to which point they will support the opposite position, in terms of price values, if things don’t go as they had expected.

Specifically, we are referring to determine the stop point or price of exit per loss.

Many authors refer to the fixing of this exit stop as the trader’s insurance policy in each trade, which we share.

Unfortunately, many inexperienced traders, let “hope” prevail and the lack of psychological capacity in assuming a calculated loss over the elemental criteria of capital preservation, causing, in some cases and in a very short time, the destruction of their trading capital and their own future as traders.

Not only the traders has to fix their exit stop by loss, also they must know what their objective is, therefore, fixing its exit, not because the trade develops against them, but because the trade has  evolved to their advantage and it is urgent to take the earned profit.

If they do not do it at the right time, the Market will take what they have made, without any contemplation.

Therefore, each time they find themselves in front of a pattern that they understand that it deserves the taking of the position, it is necessary to consider that they must determine three values in order to assume the trade: the entrance point, the exit stop, and the objective.

Only if they are sure about these three values, they will be able to click the mouse.

If you are concerned about the future, about how the world is going to be from now onward, if you are worried about how governments are going to manage the geo-biological risk and the obvious economic consequences, maybe you can consider an alternative source of income.

We are not sure if starting or even increasing your trading activity is the proper solution for you, but in the case you think it might be, we firmly believe we can help you to achieve your goals.

TradingTotal offers a comprehensive set of trading solutions for individual traders, such as discretional trading systems for any time frame to fully automated trading systems, to put the current market uncertainty in your favor.

We can help you select the best educational program and the most appropriate trading system according to your needs and preferences.

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Contact TradingTotal for more information: admin@tradingtotal-usa.com