Mon 6 Jan
Guest trader: Martin's 8 principles to trade by
Martin Nikolov is our guest trader this week
In a series of articles this week, Martin Nikolov will share his trading philosophy and then guide us how he sees markets unfolding with real-world examples. Martin is a long-term professional senior trader at Varchev Finance a firm in Bulgaria with a trading office in the City of London. He trades indexes, commodities and stocks on the basis of technical analysis, but does not ignore the fundamentals.
My trading philosophy
As each art, trading is also a
craft that requires knowledge, skills and discipline. All of these three
aspects of every craft form a philosophy that is individual for everyone. You
actions, decisions, thinking and idea - birth process will revolve around that
philosophy. As practise comes it forms principles and a routine. Being a
professional trader, you will be required to form and exceptional routine and
principles. That will get you to the long - term path of being profitable and
I will share with you my eight
trading principles that I believe in and why.
Let my profits grow
I don't use take profit. Simple as that. My
trading technique as a short to long - term trader doesn't need from me to
limit my profits. I am a trend follower as well so I open positions only in the
direction of the trend. I am backed by the motto: "Trend is your friend". I let
go of my profits to grow, building on the initial entries. I exit when I am
psychologically satisfied with the results or when the trend starts to get
exhausted. I don't use limits, because they are putting stress on me and who
ever wants to limit their potential of profit?
Cut my losses fast
As letting go of my profits to grow, also I
have learned to let go of the positions that are not doing well. Fast. Without
hesitation and never putting the trade to stay on hopes and wishes. If for some
reason - mostly unpredicted fundamentals are set in to place and the trade
stalls, can't execute my technical analysis as well, and I am in to a loss I just
close the position. This is healthy for your mental state and for your balance.
The market will always present to you the next opportunity to recover and to
grow. I also answered your question "Why?". Because I do not hope for a
If a trade doesn't go well, close without hesitation
A repetition to the upper paragraph, but this
is very important. Forging a strong mental state requires for you to take fast
decisions to protect your money. Like in life, saying "No", letting go of toxic
people or sacrificing something that brought you comfort for years, so in
trading you need to CUT AND LET GO of negativity, losses and always confronting
your comfort and safe zones. This will fine your character, mental state you
will feel more confident. Forging a "Warrior - fighter" attitude towards
trading will reflect in your personal and professional life as well. So that's
why I let go of emotions and bad trades.
Trade with the trend
"Trend is your friend" is a sentence that has
turned as a cliche but for me it my axiom in trading. I don't go below 4H chats
- I precise the entry there. I chart and stare the daily and weekly charts.
Noise is limited and pretty much you don't care about news and fundamentals.
The TREND is THE most powerful indicator. Finding it, charting it and
discovering the support and resistance levels is enough. If the trend is just
forming - that's the perfect entry. If there is a correction, enter on the end
of the correction. Never enter in a trend that's too steep and the price is no where
or at the consolidation phase, signaling that the trend potentially ends. Some
trends continue with months or even years and building positions in the
direction of the movement can lead to some very outstanding profits. Some may
say "Yeah , too long for me to get my profits". Trust me, if you want to
distinguish yourself from the gamblers, take it as a real business and to
achieve something, you need patience. Don't rush it. Why? No one became rich in
a night or couple of days - in the retail branch.
Follow a strict, company money and risk management
though I work as a professional trader and I follow strict company and risk
rules, same applies to the retail traders and everyone else. Proper money and
risk management go side - by - side with your discipline and trading routines.
There are standard risk rules: Follow 1:2 at least risk - reward ratio, don't
risk more than 1% and so on. Understand that trading in the markets exposes
your capital to 100% risk if not managed correctly. You are managing your own
money. MANAGING. Let that sink in. You on you own are a fund manager. So not
following risk discipline is a true disrespect towards your money, the art and
to the markets. It may be as much just to go tot he casino. You don't deserve
your money and to have the opportunity to trade. You need to be grateful that
first you've saved money to enter the markets and secondly - that you CAN
actually have access to the markets. From there on you are obliged to respect
that opportunity, the spirit of money and trading business. That's why you need
to follow a strict risk and money management, even as a retail.
Buy low, sell high, look for a
The tricky part. As mentioned -
look for a correction. Observing correction is the way for you to discover the
cheapest price to buy and the highest one to sell. For corrections I apply
Fibonacci levels on the main trend and on the retracements. In addition I chart
the trend lines on the spikes and on the bodies on the candles and I chart the
insider (fractal) diagonals as well. Doing that gives you a roadmap of the
potential movement of the price.
Simple as that. Never. It's a complete gamble and I've
heard a lot of people saying to place limits and stops for both of the
direction to catch the move...
Never. Trade. News.
Why? Spread can go super wide, lack
of liquidity, slippage, platform stall, extreme volatility. You can't use
proper management. Anxiety will kick in, stress, 100% risk for your money and
mistakes that can lead to a complete wipe out.
Never trade before earnings
This is mostly for the traders that
trade stocks like me. As with the news, earnings can be a true gamble as well.
Even though they can be more predictive because they rely on actual and real
accounting and numbers, and real fundamental facts, for example a trade war,
they can lead to surprises as well. The negative surprises can be a lot more
volatile and crushing the price of a stock and the positive. Also earnings are
publishes before the opening of the stock market or after the close. In these
cases you can't react at all to your opened orders. If you have stop loss on a
certain level and price before the opening or after the closes reaches it and
passes trough, it will be executed on the next opening and on the first
AVAILABLE PRICE! Which can a lot below your initial stop loss. Have that in
Trading is not simple. But it can
be easy and comfortable if you follow strict rules and be disciplined. Do not
listen to others, do not follow other analysis and do not follow signals. I
don't need to explain why...
Trading requires an individual approach, emanating from
your character. Trading is a lone profession even working in the proper office
or floor environment. Only YOU are responsible for your actions and do not
blame other people, persons or events for your mistakes and losses. Check back tomorrow where Martin will write about what he's trading right now. If you're interested in participating in our guest trader series, email me at adam(dot)button(at)forexlive(dot)com.