When you’re new to trading there’s a lot to learn and it’s easy to feel that you’re out of your depth. This advice will help you to get established and to stay out of trouble while you develop your trading strategy.
Make a plan
You’d be amazed by how many people start trading without a plan; in a scattershot way that’s highly unlikely to get them what they want. Before you begin, outline your aims. Do you want to make a lot of money fast? If so, volatile stocks, commodities and forex could be for you – if you’re prepared to accept the associated risks. Are you more interested in increasing the probability that you’ll make a profit, and are prepared to be patient? Then look at bonds and shares in established companies.
Set a budget and stick to it
One of the common reasons why people get into trouble when trading is that they overextend themselves. Work out how much you can realistically afford to invest – bearing in mind the sudden extra costs you might incur in life – and don’t be tempted to overspend just to get your hands on a bargain, because that can get addictive. This kind of discipline is even more important if you’re day trading, when using leverage can mean that exceeding your limit by just a small amount can get very expensive if things go wrong.
Find the right broker
When you’ve established the approach you want to take to trading, it’s time to find the right service providers, which means, first and foremost, a good broker. Don’t just go for the cheapest offer out there as there are always scammers looking to rip you off. It’s safest to stick to one of the big names, like avatrade, and be wary of scam sites using the same names. Look for a broker that provides good educational resources to help you find your feet.
Manage your emotions
In order to trade successfully you’ll have to understand your natural psychological biases and work around them. Some people are too nervous and never take any risks at all, which makes making money very difficult. Others find that they easily get carried away and end up making more trades or taking more risks than is wise. Don’t get sentimental about stocks and hang onto them for too long, and don’t succumb to the illusion that you can spot patterns in the markets.
Study the markets
One thing you can never have too much of in trading is information – as long as you’re able to make sense of it – and if you want to stay ahead, you’ll have to keep on studying and learning throughout your trading career. Start by getting to know the major factors that influence the markets and make a habit of keeping track of them, reading charts supplied by your broker, reading the trade press in sectors where you’re investing and staying up to date with the news.
Bear in mind that it takes most people at least six months to get to grips with trading basics. Using a dummy account to make fantasy trades can be a great way to learn without taking risks so you can pick up the skills you need to be a success.