Site icon Aximdaily

How Can You Become a Smart Trader?

Qualities of a Smart Trader

Many aspiring traders believe they will become successful traders if they spend countless hours reading books, analyzing charts, and studying courses. However, the truth is, while putting in hours may be necessary when starting out, it may not ultimately result in higher profits in the long run. But why work any harder than you need to? What if instead of trading harder, you trade smarter? You’ve probably heard the phrase “work smarter, not harder.” In that sense, being a smart trader makes sense in financial markets too!

Are you a Smart Trader?

Being a successful trader requires more than a three-piece suit and a large amount of capital. You need to understand that there is a sea of individuals aspiring to join the ranks of successful traders and earn the riches that come with it. However, only a handful make the grade or even come close. 

It is common for financial markets to go through ups and downs: stocks rise unexpectedly, bull runs end, and unforeseen events can disrupt even carefully planned investments. However, even in the most challenging environments, smart traders thrive. Trading psychology plays a major role in this. Smart traders are capable of making intelligent decisions despite extreme pressure. It also means being smart when it comes to how you spend your time and how you conduct your research. It’s also about learning how to be more efficient as a trader by using the tools at your disposal.

In this article, you’ll learn some simple ways for you to trade smarter, which will help you be more productive and trade efficiently each time.


Habits of Highly Successful and Smart Traders

Trading effectively requires more than just typing on your keyboard and developing a trading strategy. Building a smart trading mindset is one of the essential factors to successful trading, and every professional trader understands this. Unfortunately, it’s not an easy task, and you have to do it all on your own. Let’s discuss the important habits a smart trader possesses in more detail:

1. Starting with disciplines

Step 1 of becoming a smart trader is easy. Avoid making BAD mistakes.

Time frames have a significant impact on professional traders and their trading styles. No matter what type of trader you are or what trading style you employ, choosing an appropriate trading session can make all the difference. A smart trader also has a clear understanding of which assets to trade based on the market conditions. For example, during a recession, it is important to know which assets to trade and which to avoid trading.

No matter which learning approach you choose, there will always be chances for mistakes to happen. Mistakes happen almost all the time, even smart traders with decades of experience tend to make mistakes as well.  It’s common, so no need to worry about it. All you have to do is learn from your mistakes and avoid them later. Here’s why forex trading during recessions offers a better return than stocks and other investments. 

Smart traders do not open trades based on their emotions or hunches, rather they follow a trading strategy based on research and analysis. They only open trade when they believe that the trading conditions favor them and the chances of executing the trade profitably are high. They don’t jump into the market haphazardly and do trade for the sake of trading. They value each trade and know that each must be meticulously executed to keep the account growing and restrict drawdowns. To become a smart trader, you must devise your trading strategy and be disciplined in following your trading strategy.


2. Dealing with your losses

Losses are part and parcel of trading, but professional and smart traders deal with their losses appropriately and do not let the losses affect their next trades. They carefully analyze their losing trades and learn from their mistakes to improve their upcoming trades. They try to avoid the mistakes they committed to their losing trades and do not act emotionally by doubling their position in an effort to recoup the losses from losing trades.

To become a smart trader, you should be able to learn from your losing trades and keep the losses to a minimum, which will help you to undertake your next trades with a cool mind, increasing your chances of success.

How much to risk on each trade?

Risk management is key here. Smart traders only risk a small percentage of their accounts on one trade and put a hard stop-loss on each trade, which protects their accounts from high and uncontrollable losses. Smart traders usually involve in a trade after setting a risk-reward ratio indicating how much money to risk per trade. While sticking to a 1% common risk rate per trade is the most common practice, a 1:2 or 1:3 risk-to-reward ratio is also recommended, meaning profits should be at least double the losses.

A smart trader will also enter a trade with a well-thought-out entry and exit strategy. Despite knowing when the value of an asset will rise or fall, it is unlikely to be profitable until you know when to enter and exit the market. Rather than relying on their emotions to dictate their actions, smart traders are more likely to succeed as they follow a predetermined plan. 


3. Polish your analytical skills

Smart traders have strong analytical skills, and they interpret the price action and technical indicators quickly to determine the moves of the market. They analyze the price charts in detail and look for any clues and setups to determine the entry, stop-loss, and exit points to precisely execute their trades. Smart traders also keep themselves updated about the latest news and developments in the market that can move the market.

If you want to be a smart trader, you can open a demo or cent account and start studying price action and understand different technical indicators to gauge the possible direction of the market. Your analytical skills will get better with the passage of time as you regularly use price charts and technical indicators. You will be able to identify patterns and trade setups, which you can exploit once you master the analytical skills.

How do smart traders forecast market movements?

To get an idea about where the market is heading, two main types of analysis can be used: fundamental and technical. In fundamental analysis, government policy, financial markets, the state of the economy, and monetary events are analyzed to determine how the asset you trade will be affected. The technical analysis, on the other hand, focuses only on price movements and predicting future movements in the financial market based on historical price charts and statistics. 

The fundamental analysis identifies the true value of an asset based on the external factors that drive price movements by identifying whether it is over- or undervalued. Instead of focusing on the price itself, it focuses on what impacts it. On the other hand, technical analysis focuses only on the price and disregards everything else as unquantifiable data, based on understanding supply and demand.


4. Use a demo account to test out your trading strategies

It is important to note that smart traders hone their skills through practice and experience, which includes the ability to deal with losses. Most licensed and regulated brokerage firms provide their clients with a demo account pre-loaded with virtual funds. 

The advantage of demo accounts is that they provide the same trading experience as real accounts, which is useful for new traders as they get familiar with the trading platforms. By using demo accounts, users can learn how to analyze price movements, practice risk management strategies, understand spreads, and leverage tools, and apply stop-loss and take-profit orders in the real world.

There is also a common misconception that demo accounts are only suitable for beginner traders. The truth is that demo accounts are helpful to traders of all levels, including those with extensive trading experience. Due to their free nature, demo accounts are excellent tools for experimenting with new brokers, tools, platforms, and strategies.

But how long should you demo trade?

The answer to this question varies from person to person. Beginners usually learn how to trade actively after approximately one or two months of becoming proficient with trading platforms. However, It is up to you how long you need before you feel ready. The problem is, most traders spend too much time on demo accounts because they are unsure when to switch to live accounts. Although practicing with a free demo account is great, you won’t make any real money. To turn your practice and knowledge into profits, a live trading account is your best option.

For more information on this, here’s when to make a switch from a demo to a live trading account– plus a step-by-step guide.


Learn top smart trading techniques for Free!

Just because you are passionate about trading does not mean you should enter the financial market without planning. Having the right training is key to a successful trading career. Beginner traders can learn the basics of trading by enrolling in the free online trading course offered by AximTrade, which improves both analytical and practical skills.

For those interested in gaining experience in live trading conditions copy trade offers a great starting point. Trading with copy trade can be very convenient for beginners since it reduces their chances of making costly mistakes and offers the opportunity to learn from skilled and smart traders. Copy trading is a great way to improve your trading skills and develop a wealth of knowledge at the same time.

Exit mobile version