Online trading in the stock and other financial markets has grown rapidly with the spread of the internet and today you can access any market in the world from the comfort of your home.
Trading in the stock market may seem a lucrative, exciting, and challenging job but be assured that it is also a place where you can lose money faster than anywhere. To turn your hobby/knack into a full-time career you have to know the game and the rules thoroughly.
The main difference between a professional trader and an amateur is that the former avoid committing mistakes and play by the rules. This may sound a lot less exciting than popular notion but in reality, trading is more of a calm and calculative move than an adrenaline-guided one. Here are some basic tips to get on with your trading career –
Always trade with a plan
A plan or a strategy is needed to be successful in all vocations as you can’t succeed only on your emotions and whims alone. Similarly, you need to form a trading plan/strategy that will be your guiding force for all your deals. You need to form a trading plan by observing the market and analysing your needs and emotions (trading psychology).
It would be a folly to follow someone blindly in the stock market as there is no perfect approach to trading. You can build your approach based on the economic news and policies (fundamental analysis) or the calculations, charts, and graphs (technical analysis), or on a mix of the two.
A better approach would be to open a demo account and start trading in small amounts. This will help your understanding of the market as well as test the efficiency of your trading plan.
Don’t expect to get rich overnight
The most common conception about trading is that it can make you rich overnight. Nothing can be further than the truth and you should shed this misconception as soon as possible as it can lead to trading based on emotion.
Professional and successful traders know that success in trading is a long haul and losing money is a part of making it. More often than once success will mean minimizing losses than making a profit.
As a newbie, it is natural that you would like to keep losses at a minimum so you can start trading in fractional shares. You can also start with limit- orders, which guarantee the price.
Don’t bet on a single stock
Putting all your money on a single trade can be disastrous as you don’t know how that stock will develop, even if the stock looks promising in the beginning. If you are doing it then you are submitting to market forces that you cannot control. It is always better to trade incrementally in a stock.
Diversify your portfolio and trade in different industries. As the market is unsure, diversification improves your chances to make money or reduces the losses. Also, while selecting a stock always check the performance over the last few years and the future plans too. Avoid cheap stocks as often they will be difficult to sell.
Never lose your cool
Many things might go wrong in an extremely uncertain market. There might be some fault in your analysis or trading plan and you might lose money or you might not make money. To be successful in trading you mustn’t lose your calm when things don’t go your way.
You need to refocus, rectify or modify your strategies and get back to trading. Be open to modifications as market forces are beyond our control. Revenge trading can be devastating so you need to control your emotions in a trade.
Review your trades
Make a habit of keeping a detailed record of all the trades in a day. Apart from the technical and financial details also make a note of your emotional state. Got through these records over the weekend and point out the mistakes as well as the success.
These reviews will help you to refine and readjust your trading plan as well as trading psychology.
If you are considering trading as a career then you should dedicate regular time to it. Start gathering information about world economy. You should also develop a habit of watching the market regularly as an opportunity can occur anytime. Controlling your emotions and improving your patience are the keys to long-term success.