Don’t fool yourself; as a trader, you are going into ‘combat’ in the market, so you need to be prepared just as any soldier is as they head into the battlefield. In addition to essential items like guns, ammunition and uniforms, a combat solider needs a Swiss Army Knife; a single tool that has many uses, even potentially life-saving uses.
In today’s lesson, I am going to provide you with a checklist of sorts, that all traders need if they want to be properly prepared as they head into the market’s battlefield. Make no mistake about it, you are going into ‘combat’ each day when you look for trades in the market, and you NEED to be prepared. Here are the 5 essential tools you need, sort of like a trader’s ‘Swiss Army Knife’…
Trading platform and charts –
The first tool a trader needs is a trading platform and charts. Not just any charts however, you need the correct charts. This means you need New York close 5-day charts, which you can get here. This is a critical tool that you need in your toolbox because if you aren’t looking at the right charts you aren’t getting the most accurate or clearest view of what’s actually happening in a market.
Now, once you get these charts, don’t put any messy indicators or “EAs” on them; I just want you to use the trading platform with stripped-down ‘naked’ charts. That is all you need to properly and effectively analyze and trade the price action in any market.
A solid laptop –
The next tool you need to be sure to have in your trading arsenal is a high-quality laptop. I recommend an Ultra-book because they are very portable and have a long battery life, this is a must if you want to live the coffee shop trader’s life, check out the one similar to what I use here.
You don’t need a 3-stack monitor or super computer. Think mobile, be mobile. I’m mobile and I travel a lot, I love it; I can trade from anywhere in the world at any time I want. There is no computer desk or office that I’m ‘chained’ to.
Now, whilst I don’t endorse mobile phone trading, I know some of you don’t have the financial means to afford the latest laptops or iPads. So, you could perform your analysis and trade off a smart phone by the MetaTrader 4 trading platform app, but I just want to be clear that I don’t encourage people to sit there all day on their phones, because the phone view is a distorted view of the charts and I personally don’t like it. An iPad would be better than trading off a phone for example. Phone trading is the last case option if you really have no other means.
Another tool that goes along with the a laptop is a good Wi-Fi connection or mobile connection through your phone service provider. Obviously, for me, because I live such a mobile life I have a mobile data pack on my phone.
Trading journal and spreadsheet –
The next tool you need is a trading journal and spreadsheet to track your trading performance. This is a critical tool that I have found many traders don’t think they need or don’t use after a while, and these are grave mistakes.
The reason a trading journal and spreadsheet is so important is because you need something to keep yourself accountable to and keep yourself honest. Trading is a lone-wolf type of profession; it’s just you and the computer screen / charts. Without forcing yourself to be honest and keep records of your trading performance, it really is only a matter of time before you veer of course and start making trading mistakes. Trading mistakes tend to snowball and lead to more and more mistakes, which eventually results in you blowing out your account. The trading journal / spreadsheet is like a wall you put up between yourself and all those trading mistakes.
You’ll need a bankroll. This may not seem obvious, but your money is a tool and don’t let anyone tell you it’s not. Without it, you have no chance of attaining success or teaching yourself real-world trading. You need to look after it at all costs, no pun intended.
There are several factors that tie in with your risk capital:
You need to learn how to manage your risk capital, in other words, you need a money management trading plan and the things that go hand-in-hand with that are (click links to read about each topic):
It’s a good idea to look at this amount (your risk capital) as a quarterly or yearly trading budget as opposed to putting all of your money in from the get go. Don’t say to yourself, “Hey, I’ve got 10 grand and that’s it”. If you’re worth 10k you aren’t going to put 10k in. Treat it like a hedge fund; don’t put ALL of the money you have into your trading account. Try to budget it on a yearly basis. Because it’s a tool and you want the tool to be there when you need it most (like when a super obvious trade sets up). Make sure you budget your risk capital on a quarterly or yearly basis so you always have it there. What most people do is put it all in there and then soon it’s all gone. The only way to make sure the money tool is always there is to moderate its distribution.
Trading strategies ‘tool box’ –
Personally, for me, I have 3 or 4 main trading strategies or entry signals that I use. This would be considered a non-physical tool as it’s all in my head, but it’s no less important than any of the other more tangible tools we discussed already. Obviously, my job here is to help you learn a set of trading strategies and to help you develop your edge to trade the market successfully.
I want to help you learn to trade the market successfully by teaching you the same trading strategies and ideas that I have used for years and continue to use to this day. It’s not easy to learn the proper way to trade because there are so many differing opinions and methods out there. That’s why I spend so much time helping traders learn what has worked for me over the years and made my trading course and traders community accessible to everyone.
I hope this lesson has helped you learn 5 of the most important tools every trader needs as they head out onto the virtual battlefield that is the market. Don’t hesitate to email me with any questions or concerns you may have, and remember to leave a comment below.