Trading Tips, Tricks, and Painfully Learned Lessons

Trading is difficult.

Anyone who tells you otherwise probably hasn’t traded long enough, or is trying to sell you something.

I certainly don’t have all the answers, but I have learned a lot over the years and, throughout this post, I’m going to share with you some high-level trading tips, tricks, and painfully learned lessons I’ve picked up along the way. 

Most of this can be applied to any time frame and strategy, but swing trading is my perspective.

I’ve also recorded this article in video format, so if you prefer to sit back and listen, click the play button; otherwise, read on.


Proper risk management and position sizing will solve 80% of your trading problems

I cringe when I think back to my early days of trading.

Riding huge day-to-day roller coaster swings in my account equity, often times being all-in on just one or two stocks, or worse, options.

It generally takes blowing up an account or two for this lesson to sink in for most traders, but the quicker you can make position sizing and risk management as natural as brushing your teeth in the morning, the quicker you can focus on the fun stuff like strategy development and research.

Start by never risking more than 1-2% of your account per trade, then follow the other techniques outlined in this post, how to position size when swing trading.


Master a single trading strategy or setup, and then expand

Trading Tips, Tricks, and Painfully Learned Lessons

When you’re first starting out, I think it’s actually a good idea to experiment and test all kinds of different indicators, timeframes, and strategies.

But once you’ve had your “fun” for a few months, it’s time to narrow down on the one or two concepts that make the most sense to you, and hopefully bring you the most profit, and really begin to specialize in those setups.

For example, if you like trading oil and believe in entering trends on pullbacks, start focusing exclusively on those two things.

Write some backtests or simply document your discretionary observations, and become deeply familiar with all of the intricacies of pullback setups on oil.

Research, trade, adjust, document, rinse and repeat.

Master a setup and then expand.


Adapting to the market environment is vital to success

Trade the market you have, not the one you want.

Some setups and strategies just don’t work well under certain market conditions. Want to trade momentum breakouts on the last week of the year with light volumes and no ranges? Good luck.

Markets are complex systems and they’re constantly shifting gears and evolving right in front of our eyes.

There will be times where you’ll be very ‘in sync’ and other times where everything you touch immediately bee-lines right to your stop loss.

Learning how to recognize and adapt to markets was one of the biggest aha moments I had.

I talk more about it in this post, adapt to dynamic markets or fail.


Learn to love your trading losses

Truly loving losses is a bit masochistic, but the point is, if you’re someone who dwells on the past, or takes these things personally, then trading is going to be a real tough endeavor for you.

Losses and drawdowns are a necessary component of trading.

They’re business expenses (literally, they are write-offs), and for most strategies, they happen often.

Get comfortable with the probabilities and variance of your trading strategy and create a review process to stop and reflect when times get challenging.

I use periods of drawdown as a time to immerse myself in research.


Have realistic trading expectations

Trading Tips, Tricks, and Painfully Learned Lessons - Expectations

The long-term historical average return for the S&P500 is about 7% per year, and to enjoy those returns, you’ll need to endure 50%+ drawdowns.

The upper percentile of fund managers achieve average returns of 10% to 20% with drawdowns within that same range.

Can you beat the average return of the S&P500 with lower drawdowns? Can you do it consistently? If so, I’d say that’s a good start.

Remember, when you’re thinking about returns, you always need to factor in the relative risk required to achieve those results.

Want to make 300% every 6 months? That’s great, it can be done, just expect to blow up every year or two as well.


Systematize and automate where possible

Once you’ve specialized in a niche setup or trading style, it’s a great idea to think about automating everything that can make your life easier.

For example, position sizing trades is something I no longer think about.

I’ve created a position size calculator so that I can quickly plug in my stop loss and entry, and based on my own personal risk profile and account size, it returns back the optimal number of shares to enter.

Systematically measuring broad market health is also something I’ve automated. This helps me make smarter and more objective trade decisions and also ensures that I’m not missing anything important going on.

What can you automate to make your trading life easier?

I discuss all of the automated tools and technology that I use in my trading process, in this post: How to Maximizing Your Screen-Time Adjusted Returns.


Trading tips, tricks, and painfully learned lessons

If you’ve found this article helpful I encourage you to take a look at our learning center which has dozens more just like this on all things trading and be sure to jump on our weekly trading newsletter.

Thanks for reading and happy trading!


Enjoy what you read? Share it below and be sure to tag @thetraderisk.

Evan Medeiros

Evan is the founder of the Trade Risk. With 25 years of coding experience and a B.S. in computer science, Evan brings a systematic discipline to investing in the stock market.

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