Like in any other career path, there is a lot to learn when you are a novice trader. Trading can be very unpredictable in different ways. Therefore, here are some tips to get you steered in the right direction, these tools can help beginners trade better.
When it comes to trading, you’ll need a few necessary tools, including a computer or a laptop, a quick internet connection, and a reliable automated trading platform. When you are merely a beginner in the industry, you don’t need to worry about the perfect trading platform. You need to try out different options to find the one suited to your market and style of trading.
A broker is also instrumental in facilitating trades. Beginners should prefer to go for low fee brokers since high commission costs can take a toll on the profitability of the strategy.
A solid plan is a foundation for a great trading strategy. Successful traders are required to trade faster, but they are not necessarily needed to think fast. This is because they have a properly defined trading strategy in advance, along with the discipline to stick to that strategy.
It is essential to follow the trading formula closely rather than running after profits in the very beginning. Don’t let your emotions ride over your logic and abandon your strategy. Solid trading plan is the only key to success in the business.
Knowledge is power. Along with the understanding of necessary trading procedures, the day traders must keep up with the latest stock market, events and news that influence the stocks. For instance, economic outlook, interest rate plans, and so on.
Therefore, self-research and self-gained knowledge go a long way for beginners. Make a list of stocks and keep yourself informed about the shortlisted companies and general markets. Keep scanning business news and stay in touch with reliable financial websites.
For novice traders, a practical approach can help significantly in dealing with the crests and troughs better. A good strategy doesn’t need to win every time to be profitable. There are many traders who only win 50%-60% of their trades. However, in this process, they tend to make more profits on their winners than they lose on their losers.
Therefore, ensure that the risk on each trade is limited to a certain percentage. Also, the entry and exit methods need to be clearly defined in black and white.
It is essential to assess the amount of capital that you are willing to risk on every trade. Many successful traders risk less than 1% to 2% of their account per trade. For instance, if you have a $40,000 trading account and are ready to risk 0.5% of your capital on each trade, the maximum loss that will incur per trade will be around $200.
Thus, it is advisable to set aside a surplus amount of funds that you can trade with, and you are well-prepared to deal with a loss.
IMPORTANT: The contents of this post do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person.