This article is a list of tricks provided to fellow traders by Kyle Eschenroeder, an ex-professional speculator and the man who has witnessed his friend win and lose $2.000.000 day trading. Why it may be useful for you to learn from him? Well, there are two reasons for that. 1) At one point of his life Kyle was trading successfully. 2) He is not selling you anything, be it indicators or particular strategies, this man is simply sharing his knowledge.
According to Kyle, one of his colleagues has turned $30,000 into $2,000,000 over the course of three months (sic!) — only to lose everything two months later utilizing the principles listed below. Whether you apply them or not is up to you. Yet, an intelligent investor is never reluctant to learn from a fellow trader.
In his article, Kyle goes into much detail about one particular trading system that he used back in the days when he was a trader. Yet, it might be too risky to follow his strategy to the letter and here is why: 1) it was made public and therefore compromised, 2) as you will see later, every trader is encouraged to create a trading system of his own.
Here is a set of rules that you might find useful in your trading pursuits.
What you could avoid
- Your #1 goal as a trader is to learn what things do not fit your strategies and avoid them. The reason for that is simple: when you run out of money, your trading journey will come to an end. Ultimately, you do not want to risk real money before you know what trading really is, as it is the easiest way to lose your entire trading capital.
- Also, do not trade without a proper trading system. It may (and most probably will) take some time to come up with one, yet it is totally worth the effort. According to Kyle, one month of effective trading with good payouts is enough to prove the system. However, you should take into account the psychological differences between trading on demo and real accounts when making the switch.
- Do not trade when you are emotional. You have probably already heard this before. Yet, it is arguably the most important piece of information you can get on trading. You make sound choices when you keep calm and cool-headed. You make bad choices when you are excited or scared. Your trading decisions should come from your trading system (numbers, rules), not your judgment.
Creating the system
In order to create a good system, you will have to take care of the following:
Offense. This point has to do with when and how you open the deals. In other words, under what conditions will you consider a long or a short position. Remember that your gut feeling is not an indication of an upcoming lucrative trading opportunity. You should rather use signals provided by your trading system.
Defense. This point is probably even more important than the previous one. Stop loss orders can be used to help you manage losses and improve your trading strategies in the long run. It also defines how much loss you are ready to sustain in one sitting. Kyle says it is wise to use 1% of your trading capital or less. However, this is something you will decide based on the amount you feel comfortable losing.
Indicators. How many indicators should you use? The most important rule here is “don’t overcomplicate”. A simple system with as few indicators as possible (alternatively, with no indicators at all) is easier to work with than an overcomplicated monstrosity.
One more thing to avoid
There are certain things you might want to avoid. In his article, Kyle underlines that it can be detrimental to trade using a third-party trading system or a newsletter. Instead, turn to your knowledge and skills.
Source: How to Make (and Lose) $2,000,000 Day Trading: The System & The Story
And this is how you create a trading system and adopt the right mindset according to Kyle Eschenroeder. Now, when you know how to do that, you can give it a try on the IQ Option platform.
