The author is an expert in the field of multi-asset trading.
How to Trade Online
“The truth is that trading, both successful and unsuccessful, is more about psychology than tactics.”
Trading, once the sole domain of few individuals, has become available to all in the last decades, thanks to online trading platforms. Today, you are able to execute buy and sell orders yourself in a fraction of a second using computerized trading services.
''Savvy trading is a matter of squeezing out an eighth here and a quarter there until your nickels and dimes add up to thousands and then tens of thousands of dollars over an investing lifetime,'' says Richard Band in the recommendations he gives to traders.
Buying and selling stocks or trading forex can make you a fortune. However, it's just as easy to lose that fortune. However, inevitably the flip side to this is that you can all too easily lose much more than your invested capital. To become a successful trader, it is crucial that you understand all the risks involved and apply risk management practices to your investment portfolio, study trading tools and understand the theory behind them and the daily reports that drive market shifts.
1. Study trading and how to use trading platforms.
Learning to trade begins with education. Reading the news and financial websites, watching investing courses and attending seminars are all excellent ways to have important research knowledge and awareness before diving into any trading risk. When choosing an online trading platform, make sure they provide you with all necessary educational materials. One of the recommended websites for investment education is investopedia.com.
Why take time to research? Keep in mind that trading is a mental game. Your emotions are your worst enemy here. There exists such phenomenon as “Confirmation bias” This is defined as having, ‘the tendency to search for, interpret, prefer, and recall information in a way that confirms one’s beliefs or hypotheses whilst giving disproportionately less attention to information that contradicts it.'
In the trading world, this means you see a pattern and quickly make decisions ignoring the relevant information. Meanwhile, you should be doing the direct opposite. Trading is 90% mental and 10% skill. Learn to manage risk and trade unemotionally through studying and practicing your trading skills.
2. Choose a reliable trading platform.
When opting for this or that trading platform, keep an eye on their performance and technology. Apart from free educational materials and guidance tips, online platforms must first of all deliver market execution and reliable trading tools. Now that a fraction of a second is decisive, you cannot ignore the importance of speed and round-the-clock customer support.
MetaTrader 4 platform allows regulated brokers like EGM Securities to diversify their offerings and constantly provide their clients with what they do need.
3. Open a demo trading account.
You can read and gather information. However, it is not a substitute for experience. Trading in CFDs or forex should be treated like a part-time job. Like any job, it requires constant training, ongoing development knowledge and practicing skills for example.
A zero-risk way to practice your skills is to open a demo account. Many online brokers and trading platform providers, such as EGM Securities, do offer demo accounts and educational materials for free.
4. Diversify your trading investments.
The role of diversification in this process is to reduce and/or manage risk rather than to boost performance. By agreeing level of risk that you can manage, based on your goals, time horizon and tolerance for market volatility, a diversified portfolio has the best chance of achieving your aims. It needs to match your own personal goals, objectives and attitude to risk.
Reducing risks and smart trading is what you need always to keep in mind. The Wall Street Journal published a feature in 2013 titled 'Investing for the Fun of It'. Here is an excerpt where the magazine recommends setting clear limits.
''Win or lose, the key to using play money safely is to make sure it involves a sum the investor can live without.
"Enjoy the fun of gambling and the thrill of the chase, but not with your rent money and certainly not with college education funds for your children, nor with your retirement nest egg," John Bogle, Vanguard's founder, wrote in "The Little Book of Common Sense Investing," published in 2007.
Mr. Bogle wrote that what he called "funny money" should amount to no more than 5% of a person's investments. Some experts put the limit lower. Mr. Malkiel says it depends upon the investor's individual circumstances.
Getting the proportion wrong is one risk. Another is that an investor will lose, for example, 5% of his or her money and think, "I was so, so close. Let me take another 5%," Mr. Statman says. The temptation to keep on trying to win is common, he says, and some people find it hard to resist.''
5. Develop trading strategies.
Irrationality is the enemy of trading. Before opening and trading on a live account, specify your short-term and long-term goals and consider ways to achieve them by setting clear limits.
Include in your plan the following recommendations:
- Invest only money that you can afford to lose. Make intelligent decisions about what you can easily afford to invest, and begin slowly.
- Set aside the time to research. Check statistics and daily news so you keep abreast of the developments around the world which could ultimately affect the world of investment markets.
- Do not give in to fear. Trading is a long-term investment and requires patience and perseverance.
- Watch and learn. Find experienced traders who have a style similar to yours and learn about their strategies and techniques.
- Act smart. Your long-term future is more important than your short-term desire to get rich overnight.
All trading involves risk. You can lose more than you invested.