The world of trading has for a long time been the activity for a privileged circle of people. But not anymore. Thanks to the internet and widely accessible trading platforms, anyone can trade. If you are thinking of investing some money in stocks, cryptocurrencies, or maybe commodities, here are some tips that will help you with whatever asset you choose.
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Make a trading plan
Would a businessman think of starting a business without establishing a business plan first? Of course not! Your trading plan should allow you to set achievable goals. To begin with, a new trader should set only one goal: not to lose. Then, if you can do it, try aiming for a small goal. If you can achieve it, then you can try to aim for a bigger performance.
Be careful with leverage
Leverage is indeed a double-edged sword. You will often tend to think only of the gains when taking a position. Remember that if you can make, for example, $ 8,000 by taking a position in the market, you could just as quickly see them go up in smoke.
To avoid mistakes, a newbie should never exceed leverage of 2 or 3, and a seasoned trader should limit himself to 5. Try to take a small position. Then double it if you are in the right trend.
Also, beware that the best brokers are not those who offer you the highest leverage. Many other factors are determining their quality. That’s why for instance, if you wish to trade foreign currencies selecting the right forex broker according to certain criteria is of utmost importance for the success of your trades.
Apply the rules of money management
Some beginners are not shocked by putting 15 or 20% of the capital at risk on a trade. The crucial rule of money management is simple. You should never risk more than 1 or 2% of your account on a transaction.
Know how to cut losses
Before you can learn to win, learn not to lose. It is essential to always protect your capital with a so-called “stop-loss” order. You must also use a stop loss to protect your capital.
Common mistake: accumulating losing positions without wanting to cut them. As long as the position is open, there is no loss (the famous saying “not sold, not lost”). Yet a latent loss is very much a very real loss at time T.
It is therefore preferable to quickly cut a losing position. And the sooner, the better, because the larger the loss, the harder it will be to close the trade.
To become a good trader, keep your cool
Be patient to look for the right opportunity and to be able to wait for market conditions to be favorable to the applied strategy.
You shouldn’t let your emotions take over, but you shouldn’t ignore them either.
Have confidence in your judgment. Many traders do not analyze the markets and have no opinion. They just read reports and analyses published by professionals. Is this the right way to learn to trade? No, obviously. And by copying the advice of others, you will be vulnerable because you will not be able to spot potential mistakes. Trust your reasoning.
Trade with money that you don’t need immediately
Whenever possible, trade with money that you don’t need to make a living. On the one hand, because it is not excluded that you can lose it and, on the other hand, because by trading with the money that you need to live, you will not be able to properly manage your emotions, and they will necessarily take power over your rational reasoning.
