Trading on the stock market is exciting, but it can also be a volatile system in which money is quickly gained or lost. Successful traders understand the level of risk compared with the level of pay-off, mainly because they invest time and effort into understanding their craft. If you want to trade online, there are a few things you can do to help…
1: Watch for trends
Randomly choosing an investment is unlikely to work out well. Watching the markets for trends, and then trying to predict shifts, is one way to limit your risk and hopefully increase your chances of a good profit. Analytics software can help you with this, providing a digestible method for absorbing data. You might also be able to set up alerts on particular items you’ve shown an interest in, so you’ll know when prices are in your favor.
2: Know your limits, don’t risk it all
This is advice in two parts: firstly, don’t risk more than you can afford. It’s easy to get carried away with investments, particularly if you’re doing well (“I can’t stop now, I’m on a roll”) or have suffered losses (“I can’t stop now, I need to make back what I lost”). Be strict about how much you can genuinely afford to invest, and stick to it. Secondly, don’t risk all your capital on a single item. If it fails, you’ve lost everything.
3: Understand the stats
Knowing what all that strange trading terminology actually means is a necessity. Trade-types can vary considerably, with different risks and benefits. The same could be said for understanding the numbers you see as you browse trading platforms. Okay, you might not need to know everything, but the basics (such as how pips or commissions will affect your profits) will help to inform you as to whether a trade makes sense or not given the amount you’re investing.
4: Consider building a portfolio
Portfolios are often used by professional traders. These are essentially a list of items (raw materials, companies, products and so on) which you invest in. Spreading your capital across multiple investments means you’re less likely to lose it all in one fell swoop. After all, it’s not likely that ten different items will all suffer a loss at once, but it could happen on just one or two items. Building a portfolio can also be fun because it means you can invest in a variety of items, or you can copy the portfolios of other traders.
5: Auto-sell-buy can save you
Auto-sell and auto-buy functions essentially work on your behalf when you’re not around to make decisions. If a product reaches a certain high or low price, the system will buy or sell on your behalf, strictly according to the limits you’ve set. Therefore you can sell your corn whilst you sleep, before you make a loss on it, or buy steel when you’re in the gym (and you’re pumping iron!) and it’s reached an all-time low. Even eagle-eyes get tired, but the robots don’t!
Staying vigilant and watching for trends, whilst also being aware of your risks and limits, are great ways to improve your chances of success when trading. Whilst there are no guarantees, good investments are often carefully considered and monitored.