The Top 3 Three Must-Know Principles every Trader Understands (If you don’t know these, you’re still a beginner!)

Throughout these posts, I’m going to be giving valuable tools to help your trading. Even if you don’t feel like you are a beginner, I promise you there will be something for you! This introduction is the foundation of what you absolutely need to know. Here we are going to cover,

1. Price Principles

Most you the viewers here are familiar with buying and selling goods. Price moves every day. Wouldn’t it be nice if you had a historical graph of, say the price of laptops, or shoes, or any particular item you wanted to buy? Well we do with investments. This is incredibly good news because it gives us reference point. The best reference point we have in the chart, and our chart is dictated by two things: Time and price. Very very very simple. However, charts can be represented with more detail. Candle sticks are a useful tool that most traders use to refine details of time and price on the chart.

bullish-candle-open-close

Let’s start with the body of the candle: this gives us the open and the close. The wick gives us range in which the stock moved.

Which Candle has the largest range?candle-stick-question An amazing amount of information is packed in every single one of these seemingly innocent candles. Hopefully, you chose the candle on the far left.

2.Trading Terminology

This candle below going up, so what type of candle is this, good or bad? Green is good right? You need to stop thinking like that! WRONG.

the-green-candle-to-prove-a-neutral-point

Green is up, and is not better than red whatsoever. Red candles change in price 63% faster than green candles. Why? Because almost everyone believes green is good, so when the price falls, the masses fall with it. Use this to your advantage and learn to become a logical trader. Rather than using “good” and “bad” associations, experienced traders use the terms bullish and bearish to refer to the market. That’s it.

3.Entries, Stops, and Targets

There are three elements of every trade. Entry. Stop. Target. The first is the entry. My mentor once told me, you make your money when you enter a position. That’s a little different how most people think. Most people think they make their money when they exit a trade. However, the entry is where you gain the largest amount of profit potential. At work, when do we make the most money? When we clock in or when we clock out? In our case, it is when we get up early, beat traffic, get our coffee, and clock in. Why? Because much like when you want to maximize your hours on the clock by coming in early, when we enter a trade, we want to maximize the amount of profit before we take it.  You want to enter as close to the point where you are proven wrong as possible. Finding this point is difficult, and most traders would immediately increase their profits if they had a better idea of where this was.

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