How to Trade: A Practical Step-by-Step Guide
Short summary: Trading is a discipline — combine a clear edge, strict risk management, and consistent psychology to win over time.
Table of contents
1. Why trade — and what style fits you?
First decide your time horizon and personality. Common styles:
- Scalping: very short trades (seconds-to-minutes). Needs fast execution, discipline, and a strict risk plan.
- Day trading: open/close intraday positions (minutes-to-hours).
- Swing trading: hold for days to weeks on market structure and macro themes.
- Position trading: lower-frequency, based on fundamentals and macro trends.
Tip: pick one style and master it. Traders who try to be everything often fail.
2. Build a trading setup — find your edge
A robust trading edge = market + setup + rules. Example building blocks:
- Market: Gold (XAU), NASDAQ e-mini, forex pairs — choose what you can monitor and understand.
- Timeframes: align multiple timeframes. Example: use 15m for context, 5m to spot structure, 1m for entry (common for scalpers).
- Technical tools: price action (pin bars), Fibonacci retracements (especially 61% for many traders), EMA 100 as trend filter, RSI to check momentum.
- Confluence: trade when 2–3 signals agree (e.g., Fibonacci 61% + pin bar + RSI divergence).
Write your rules like code: if (trend == up) and (pullback_to_Fib61) and (pinbar) then enter_long.
3. Risk & money management (non-negotiable)
Common rules that successful traders follow:
- Risk per trade: 0.25%–1% of account equity for most traders. Scalpers often use the lower end.
- Position sizing: calculate size from Stop Loss distance and risk amount.
- Risk-reward: aim for setups with positive expectancy — e.g., average RR ≥ 1:1.5 over many trades.
- Daily loss limit: stop trading for the day if you hit 2–4% drawdown to prevent tilt.
Position size formula (simple)
// Risk per trade = Account * RiskPercent Account = $50,000 RiskPercent = 0.5% => RiskAmount = $250 StopLossDistance = $10 (price points) PositionSize = RiskAmount / StopLossDistance = 250 / 10 = 25 contracts/units
Always round position size down to respect capital and margin rules.
4. Execution & tools
Choose reliable platforms (many traders use TradingView for charts, NinjaTrader for execution). Essentials:
- Low-latency broker and reliable platform (paper-trade first).
- Use limit orders for planned entries; market orders for urgent exits.
- Set OCO (One Cancels Other) for stop & target where available.
- Record every trade: screenshot, note entry reason, emotions, and result.
Automate alerts: for example, add alerts for price touches Fib 61% + pin bar candle close to avoid staring at screens 24/7.
5. Trader psychology
- Control risk, not outcomes. Accept variance — even edges lose sometimes.
- Avoid revenge trading after losses; implement a daily stop.
- Routine improves decision-making: pre-market prep, mid-session check, post-session review.
Keep a trading journal. Screenshots are perfect: they record actual market context.
6. Sample scalping setup (practical example)
Example: scalping Gold on 1m with 5m/15m context. This mirrors many price-action + indicator approaches.
Rules
- Context (15m): overall trend above EMA100 → look for longs only.
- Pullback (5m/1m): price retraces to Fibonacci 61% of the last swing.
- Confirmation (1m): bullish pin bar or bullish engulfing + RSI rising from oversold.
- Entry: after the confirmation candle closes; place limit order at the high of the entry candle.
- Stop Loss: below the pin bar low + 1–2 ticks buffer.
- Target: 1:1.5 to 1:2 RR or scale out: 50% at 1R and the rest at 2R.
Example numbers
Account = $10,000 Risk per trade = 0.5% => $50 Stop distance = 5 ticks => PositionSize = 50 / (5*tickValue) (Adjust to instrument tick value; round down)
If you trade NASDAQ or futures, check margin and tick value. Always test the exact math on your platform.
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