Trading is tough. It's not easy when you first start out and it will be a challenge - there is no doubt about that. It is like starting your first job - you have no idea of what you are doing at first and it takes time and effort to learn the ropes and get into a routine.

Below are some tips that will help you get started with your trading journey and assist you in becoming a Trader.

1. Have a trading plan

Trading is a business and for a business to survive it must have a plan. The statistic is that 80% of traders fail, if you want to be in the 20% of traders that succeed in the markets, then you need to have a trading plan.

These are the areas that you need to cover in your trading plan:
- goals & objectives
- trading structure
- trading tools
- trading style
- trading indicators
- risk & money management
- market exposure guidelines
- trading systems (including your set-up and trigger criteria for each system and exits)
- trading routine
- contingency plan for all worst-case scenarios
- personal psychological trading rules

2. Find a style of trading that suits you

Trading is about developing an approach that you are comfortable with that suits your personality and lifestyle. The main two types of analysis that can be used for trade selection are fundamental analysis or technical analysis. You can focus on one of these methods or combine the two together.

Fundamental analysis is based on the use of economic data and company statistics to forecast prices. It involves reviewing company balance sheets, profit and loss statements and really studying the company, its management and its competitors to determine the actual value of the share. If you enjoy reviewing figures and interpreting data, then this type of analysis may suit you.

Technical analysis on the other hand involves reviewing actual price and volume activity of a share using charts, which helps to determine the best time to buy and sell a share. Markets move in trends and by understanding how shares trend you can determine the overall health and possible future price direction of a share by viewing its chart. A technical analyst studies the way the buyers and sellers are reacting to a share through its price movements, rather than studying the company itself.

I believe technical analysis gives you an edge in the market - it not only provides signals of the best time to buy, but most importantly it identifies the right time to exit, which is one of the most important and difficult parts of trading.

3. Develop your trading rules

What type of share do you want to own?
What is the set-up criteria that has to be present before you would consider entering a trade?
What trigger are you looking for to enter a trade?

These questions determine your trading rules and you can develop a trading system based around these three questions, as well as spending time analysing winning and losing trades and back testing.

A great way to start is to adopt a trend follower approach using a mechanical trading system, with entry rules and exits. You may have two different systems

For example

(1) A weekly long term trend following system.

The goal of is to stay in the long term trend of the share and to remain with the trade until it becomes unhealthy and an exit signal is provided. The hold time ranges from a few months to possibly a year or two. This system involves running a scan on the weekends looking for shares that meet certain entry criteria and requires approximately one hour of work a week.

(2) Is a daily breakout system.

The goal of this system is to trade a swing move in an already trending share. It has an average hold time of 4 to 6 weeks. The system involves running a scan once a day and requires approximately half an hour per day of work. This system could trade both long and short in direction of the trend and can be traded using CFDs or shares.

4. Manage your risk in the market

As the saying goes, there is no reward without risk and risk is an essential part of trading. Your long term success as a trader depends on how you manage your risk in the market. Unfortunately, you can't control the market - you don't know what's going to happen tomorrow or the next day, the only thing you can control is how you manage your risk in the market.

The goal of professional traders is to let their profits run and cut their losses short, which is all about managing risk. It does not matter how many winning trades you have, if you can't manage to keep your profitable trades larger than your losses you will not survive in the market. Trading is all about protecting your capital and you need to avoid risks that will put you out of business. You only need to have one or two bad trades in your portfolio that you let go (such as a Onetel or HIH Insurance), and do not exit at a small loss, and your entire portfolio could be in a loss.

5. Position size each trade

Position sizing basically answers the question of how many shares you can buy. It is a key part of your money management strategy that is designed to manage risk.

For each trade you open in the market you need to decide up front how much you are prepared to lose. It might be a set percentage of your capital or a set dollar amount. It will be this risk amount and an initial stop loss that you can use to determine how many shares you can buy.

6. Use stop losses

How will you limit your losses and protect your open profits once you are in a trade? Money is made in the market through position sizing and a good exit strategy. All traders will experience losses in the market, but it is knowing how to limit your losses that is important, as well as knowing how to let your profits run - these are the keys to trading success.

The goal of a stop loss is to protect your capital by keeping your losses small and protect your profits once a trade moves favourably your way. Professional traders never enter a trade without first setting an initial stop loss. Then once a trade moves favourably this stop is raised to a breakeven stop and continues to be raised as a trailing stop until eventually the share hits the stop and they exit the trade. It is how you exit a trade that is far more important than how you open a trade.

7. Manage your heat in the market

Portfolio heat basically answers the question of how many new positions you can have open at any one time. Professional traders use this technique to manage and quantify their total risk in the market. They understand that trading is about the successful management of risk and they always know what their worst-case loss would be if all their positions were to hit their stops in one day.

You need to decide up front how many positions you are prepared to have opened at once with an initial stop loss. Think in dollar terms that if all your trades were to hit their stops in one day how much money would you be prepared to lose in total. This answer will be individually based and is dependent on your own personal risk profile.

You might decide up front that you are comfortable opening three trades at once with an initial stop loss. Once you have three trades open, you stop opening new positions until one of the trades moves in your favour and you are able to move your stop loss to breakeven. Once you have moved a stop to breakeven, this means that you no longer have risk open on this trade and you can open up another new position with an initial stop loss - once one becomes available to you and you still have capital available to trade.

8. Pyramid into winning trades

Professional traders use a technique called pyramiding to build positions and add to an already profitable trade. If you have a winning trade, ask yourself:

- Will you add more money to the position?
- If so, at what stage will you do this?
- How will you size the additional entries?
- What stop loss techniques will you implement on the additional entries?

The most effective way to pyramid is to purchase more shares in smaller lots than the first trade. As the trend unfolds and the share moves in your favour, add to the share by buying smaller parcels each time. That is why this money management strategy is called pyramiding UP” you build a position based on the largest parcel first and then each additional parcel is smaller than the previous.

9. Keep good records and regularly evaluate your performance

Trading is a business and in order to manage your business of trading it is essential that you maintain good records and understand how your business of trading is regularly performing.

The easiest way to track your trades and manage your risk on an ongoing basis is to have a trading diary of some form - this might be an exercise book or an Excel spreadsheet.

10. Continually work on improving your Mindset

YOU are the most important factor in your trading. You're the one that makes the decisions; you're the one that decides what happens once you open a trade. It is what goes on inside your head that will make or break you as a trader. You need to develop yourself awareness and understand your motives for trading. Trading is not just about making money, it's about becoming the best trader you can possibly be and money will flow from good trading.

Risk management is a key part in your trading plan, as well as being disciplined to follow your plan and trading unemotionally - that is the hardest part. Because, once you put your money in the market your emotions will get involved. So you need to continually work on yourself psychologically to ensure your success.

Finally, keep it Simple

It's easy to get bogged down with too much information in trading and wanting to use too many indicators to make trading decisions. In essence it is simply about the direction of the trend and exiting when the trend changes. That is always easier said than done, because your emotions also come into play and effect your trading decisions.

OmniTrader is a mechanical system you use a mechanical filter to scan for entries and a trailing stop loss indicator for exits. As well as incorporating a range of money management techniques to size a trade, manage maximum open market risk and maximize winning positions through pyramiding, all of which will save you money.