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Trading: 5 Useful Tips

Even though you need to look at ratios, charts, and numbers, the truth is that trading is more an art than a science. Although you need to know what you’re doing, only talent can make you succeed.

One of the main secrets of the best traders in the world is actually pretty simple: they are disciplined and experienced. They keep analyzing themselves to understand what is making them trade, and they just learn through experience to keep away from both greed and fear.

The next 5 useful tips are great for both beginners as well as to more experienced traders since they can help them make more profitable trades.

#1: Define Your Goals And Define Your Trading Style Accordingly:

When you decide to start trading, you can’t (or shouldn’t) take some money from your savings account and see where it may take you. Although trading doesn’t need to be complicated or hard, you need to know a few things before you even start. And one of the most important things is for you to define your goals.

One of the problems many people have when they start trading is that they keep saying that their goal is to make money or to be rich. These are not measurable goals. You need to define a realistic goal for yourself or you’ll simply get lost. As soon as you have this one defined, it’s time to choose the trading style you’re going to adopt. Your trading style depends on your risk profile, on the amount you have to trade, as well as on your attitude or personality. While some people just can’t fall asleep knowing they have an open trade on their hands during the night, others just don’t care about it and prefer the long-term trading, where they aren’t concerned with the daily activity.

Make sure that you don’t go against your personality or this might go very wrong for you.

#2: Choose A Methodology And Be Consistent:

Before you decide to become a trader, you should already know what motivates you to buy or sell. While some people prefer to rely on the “real” economy, the fundamentals, others prefer to use solely the charts to determine their entry and exit trades.

While fundamentals are often seen as precious mostly to long-term traders and technical analysis to short-term traders, there’s nothing stopping you from using both. Let’s say that you’re looking at the fundamentals of a company and you believe they are gaining market share, that their sales should increase, and there’s really no competition. So, you’re adopting a fundamental analysis. However, you may take technical analysis to decide the best entry point.

No matter what you decide, there’s no right or wrong here. The only thing that you need to do is to be consistent with your choice while allowing some room for changes since the market is always changing.

#3: The Entry And Exit Time Frames:

Either when you’re looking at a stock, a currency pair, or a commodity, you may get confused if you’re getting the opposite information from different time frame charts. Let’s say that you’re seeing a buying opportunity on the weekly chart but the intraday chart says that it is actually a sell signal. So, what do you do? It depends from where you are basing your trading decisions. If you usually use the weekly chart to make your trading decisions and it is saying that there’s a buying opportunity, just wait for the intraday chart to show you the same to enter the trade.

#4: Small Losses Can Be Great:

When you are trading, you will have wins and you will have losses. That’s a fact. Not even the best trader in the whole world is able to avoid this. It’s just the nature of the market. The better you are prepared for the losses, the most chances you have to succeed.

Just fund your account looking at the money as if you were going to spend it on vacations. As soon as they are over, so is the money. This will help you deal with losses in a better way.

Whenever you have a small loss, don’t get angry or blame the market. Just analyze what you did and learn from your mistakes if you made some. Remember that you were able to turn it into a small loss. It would be a lot worse if you let the trade sank.

#5: Build Up Your Confidence:

When you’re trading, it’s important to have confidence in your skills and abilities. However, how can you be confident if you never traded in your life?

This is something that is gained with time and with positive trades. When you manage to have several wins in a row, your confidence will increase over time.

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Do You Want To Start Trading? Read The Instructions

Many people are attracted to trading. After all, it’s one of the few ways that you have to belong or to be a part of a huge company. Even if you only have money to buy 1 Apple share, you’re still considered a shareholder. And this is something that not everyone can say. However, trading, either stocks, futures, Forex, or any other financial instrument, is not as easy as you may think and each one of these particular markets has their own specifications and terminologies. When you’re a good stock trader it doesn’t automatically mean that you’ll be an awesome Forex trader or a great commodities trader.

Are You Considering Trading Online?

When you’re serious about trading online, the first thing you need to decide is about what you’re going to trade. You can choose between stocks, futures, Forex, CFDs, options, and so many other financial instruments.

Usually, when people refer to trading they are usually referring to stocks. If this is your case, you should go for it. You need to make sure that you read and understand all the terminology behind this specific financial market and then decide the strategy you’re going to use to trade. You can either choose between fundamental analysis or technical analysis or use both. You can prefer the quick trades that are usually riskier but tend to offer higher returns like day trading, or you may simply want to give your savings a chance to make money on their own. In this case, you’re going to opt for a longer-term strategy, more specifically, based on stocks that pay high and consistent dividends.

As you can see, it’s not only about making the decision about the market that you’re going to trade on. It’s a mix of decisions that should be based on your personal preferences and on your own personality as well. If you like to risk, go ahead for day trading. But if you’re a more conservative person, then you should rather choose swing trading or an investment (long-term) strategy.

What About Forex?

The Forex market is not new anymore. However, due to the low amount that you’re required to open an account with a broker, it’s usually one of the preferred choices among new traders. This combined with the fact that it is open 24 hours a day, gives you a lot of flexibility to trade, even if you have a full-time job.

There’s no question that the Forex market is attractive. The leverage (although it was better a few years ago it’s still better than the stock market, for example), the margin, there are countless benefits of trading this market.

However, you need to be careful with one thing. What may seem an advantage in the first place, may not work as well when you’re trading by yourself. Let’s take the fact that the market is open 24 hours a day. If you already got the chance to open a chart for any specific pair, you’ll notice that despite there are times within the day that the currency pair has a huge transactions volume, on other occasions it just remains almost flat. The fact is that when you’re trading the Forex market, you’ll need to look for the time where the currency pairs you want to trade have more volatility. This is how you’re going to win money trading the Forex market. And this schedule may not be compatible if you work and can’t access your broker platform during the day.

So, What’s My Final Advice?

My advice is that you need to choose a financial instrument that you feel comfortable with. Despite the disadvantages that I focused above about Forex, you can place automatic orders that will be filled if the price of the currency pair you are trading reach a determined price. So, you’ll still be in control, at least, in some part.

In what concerns stocks, there’s a lot to say about them. You need to think about using or not using indicators, which ones, the kind of orders you’re going to place, among so many other things.

The thing is that there’s not a perfect market. The best market is the one that you feel most comfortable trading on.

Scams: It Pays Off To Be Alert

Unfortunately, there are many scams out there. Both on the broker’s side as well as on the strategies people try to sell you as amazing and that will only make you lose money.

Make sure that you do a good due diligence before you open an account with a broker. And in what relates to any possible service that can provide you with signals for the best stocks, commodities, or currency pairs, make sure to test them on paper first. Don’t commit your hard-earned money without even knowing how good this company is.


Author: Editorial staff of 70 trades reviews blogĀ