When we think about trading, we often associate it with the notion that it’s a lucrative venture, but the truth is trading needs practice and a lot of effort so you can make good money. However, in order to do this, you need to approach trading with the right strategies and acquire good money management skills. Of course, you’ll need some experience to know what works and what doesn’t in the trading world, but if you’re trading for beginners, you’ll probably need to understand the steps first to help you learn the patterns and trends associated with trading. Keep on reading to know more about the tips and tricks that can make trading profitable.
Find the Right Broker
While this step is not directly related to trading per se, it’s certainly a good thing to start with. You should go through the internet, search for the best online brokers, and make sure to read their reviews, as every broker operates differently. You should also check whether or not they’re licensed, trustworthy, and can go along with your trading style. Moreover, if you aspire to become a trader, then you will be earning money by the short-term skyrocketing of prices, which means you’ll make many of your trade executions in a short span of time. Thus, you’ll need to search for a broker with a minimum amount of trade execution fees, as this can affect your returns in the future.
One of the best ways to gain experience is by basically analyzing all the data that you get through your trading activities. This will help you recognize patterns and aid you in making strategies for future trades. However, you should not just pay heed to trade decisions and pattern recognition, but you’ll have to question yourself. For example, ask yourself what made you choose that trade, why did you choose that currency pair and so on. This also includes analyzing information that you get from newsletters, as the financial advisors at Pennystocking Silver point out, newsletters will keep you up-to-date on new ideas, brush up on old ones, and provide you with video tutorials that will help you study the process of training so you can develop your own strategies. You will also have the option to receive notifications via SMS email or push alerts, which will typically keep you notified of stock prices at all times. This can be useful, considering the volatile nature of stock prices.
Consider the Risk
If you’re a beginner, then you wouldn’t want to risk putting too much at first, because there’s always an equal chance of failure as success. In fact, this risk is probably going to always be there no matter how skilled a trader you are or how much experience you have garnered over the years. There is always a high chance of losing in every trade, since other brokers are also trying to make money just as you are, so you’ll have to focus on minimizing this risk by following strategies like:
● Stop Losses
Stop losses is a strategy that will pull you out of a losing trade at an early stage to minimize the risk involved. For example, a 1:1 risk-reward ratio will reduce losses and increase profits on each trade you make. A 1:2 risk-reward ratio, however, will ensure that there is profit in all your trades even if you’re losing at most of your trades.
● Control Losses
You can control your losses by simply setting a threshold for the amount of risk you’re willing to take on each trade. A 2% risk or less on your trading account is recommended, as it can ensure that you’ll be able to maintain and survive the losses dealt with your trade account.
● Use Leverage
Using leverage can be extremely advantageous to your trade, but it can also increase the risk of losses significantly if not used with caution. Because they work as unlimited leverage, your profits can be 50 times bigger than they would have been originally without leverage; thus, reducing your risk. However, the same thing applies to your losses, as they can be 50 times larger as well, so while leveraging can minimize risk when you make a profit, it can also increase the number of losses at the same rate. That’s why traders strictly use leverage with caution.
Make a Plan to Every Trade Beforehand
While it might sound, as a matter of fact, you shouldn’t initiate any trade without formulating a strategic plan in advance as well as a back-up plan. You should be able to expect potential outcomes and make decisions on how you will react to them should they occur. If you don’t know how to do this, there are multiple sources over the internet that provide courses, video tutorials on management plans, and backup plans. Devising a plan should give you a rough outline of what you’re buying and selling, how much you’re going to trade, and when you’re going to do so.
Technology Is the Key to Success
There are no bounds when it comes to technological advancements, especially with the type of technology we find in the trading world. As you start your trading journey, you’ll find thousands of traders and brokers out there who’re all using different strategies and tools to increase their success rate. Thus, getting your hand on all the resources that can help you become a successful trader is a must. Such tools include but are not limited to charting platforms, which will help you make market analysis, test your own strategies on old data, and mobile applications, which will typically grant you access to the market anywhere and at any time. They are also a great way to be up to date with the latest trends and news of the market.
Having said that, you can now start reviewing the trends, know how the market works, and devise strategic plans based on the data you come out with. Also, be sure to decide whether you’re interested in short-term or long-term trade, as this can change the risk management plans you're going to implement. Moreover, seeking the help of financial advisors will also help you evaluate trades and the risk involved.