STRATEGY

Any trading strategy without some key attributes will fall short in the long run, and this is why over 90% of retail traders are not profitable, even after their first 5 years of trading. Certain fundamentals are key to securing consistent profits that are well worth your time and effort. Below is a brief list of these key trading fundamentals.

I. RISK MANAGEMENT

Risk Management or "money management" may be one of the most if not the most important rule when trading any financial market. In a nutshell, risk management involves the trader not leveraging or risking any more of their portfolio than necessary. Most traders risk between 1-2% of their trading account when trading. This number seems small, but when were talking tens of thousands of dollars in a trading account, this number isn't so small.

FOREX

Managing your risk involves setting a limit for how much leverage you plan on allowing yourself to trade with. Certain brokers allow 1:1000 leverage, which is essentially 100% risk. This falls under the category of irresponsible or reckless risk. Experienced traders with smaller accounts using high risk will use this amount of leverage to turn a small amount of money into a substantial amount in a small amount of time, while utilizing every penny in their trading account. A more conservative but still risky amount of leverage is 1:500 leverage. This essentially allows the trader to risk 50% of their account before the broker steps in and limits the trader without their control. Further down the line of conservative trading involves 1:200 and 1:100 risk, which you guessed it, allows the trader to risk 20% and 10% of their account respectively. The more you learn about trading, the more you'll understand the leverage that suits you the best, while incorporating your leverage with responsible risk management.

STOCKS

With stocks risk management is calculated a bit differently. Unlike forex, your amount of shares owned in any given stock will remain unchanged unless the stock you trade undergoes a split, or flatlines (reaches a price point of zero). Traders should still aim to not risk more than 1-2% of their portfolio, but instead the shares a trader owns will only affect the value of those shares, and can be held for longer periods of time than forex instruments. Since forex trading involves a declining balance compared to a static balance, stocks are considered to be a far more conservative route of trading financial markets than forex.

II. TECHNICAL ANALYSIS

Technical analysis is one of the key components of trading both forex and stocks. Technical analysis encompasses many key components of market structure, and essentially makes up much of the "meat" of what any trader will be figuring out throughout the course of their trading careers. In short, technical analysis consists of two main subsets: Support and Resistance. Support is the range in which a given instrument cannot pass through to the downside. I use the term "range" because support isn't determined over a specific price, rather a range of various nearby prices. Resistance is the range in which a given instrument cannot cannot pass through to the upside. A good example of this can be described using a channel where price fluctuates and finds pivot points within the channel. A visual of support and resistance can be seen below.

III. FORMING YOUR TRADING STRATEGY

Once any trader has taken the time to understand Risk Management and Technical Analysis, it's time to start planning your trading strategy. It'll take time to understand the complexity of market structure and everything that goes into it, so do your own research to understand why the market moves the way it does. If you're brand new to trading, or if you've been trading for a while, it's also not a bad idea to open a Demo Account. A demo account, commonly referred to as "paper trading" involves opening a trading account in any financial market that involves trading with virtual currency. Now I'm not talking about Cryptocurrencies, which are a beast all their own. Rather I'm referring to abstract currency that appears to be genuine, but instead is used as a realistic comparison to real capital. This provides aspiring profit traders with a simulation type experience, allowing them to trade financial markets in real time without any up-front investment. At Top Tier Trading we strongly advise all traders to take 6-8 weeks to form their understanding of the markets, while also forming their trading strategies using paper trading. After a trader is able to do this successfully with consistent profits, they are advised to open a Live account. A Live account involves making a deposit with a broker of your choice to then trade with during market hours.

The dates/hours/sessions for both the forex & stock market(s) are as follows:

FOREX: Open 24 hours a day in most parts of the world, from 5PM ET. on Sunday until 4PM ET. on Friday. Since the forex market operates throughout different international time zones, it is able to be traded over a 24-hour period.

STOCKS: The stock market is tradeable depending on your broker over three trading sessions. The pre-market trades from 4AM ET. to 9:30AM ET. M-F. The regular market trades between 9:30AM ET. and 4PM ET. M-F. The after-hours market trades from 4PM to 8PM ET. M-F.