Home Education Trading 101: The Best Tips and Advice From the Experts

Trading 101: The Best Tips and Advice From the Experts

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Trading can be difficult to understand for any newbie. Whether you’re investing in stocks and shares, forex (FX) or contracts for difference (CFD), there is a lot of work that goes into learning the tricks of the trade. There isn’t a straight-forward route to being a successful trader, but there are some things that will help you along the way. 

Some of the industry’s leading experts have written books on their trading tips, click here to find out more, while others have shared advice online – and it definitely pays to take as much on board as possible from the wealth of information already out there. By becoming a voracious reader – and a magpie of the best ideas – you’ll stand a much better chance of making a success of your trading efforts. 

As a professional trader, you’ll be someone who has experience in finance and you’ll understand the concept of the stock market. Primarily, your job will be buying and selling stocks, bonds or cryptocurrencies for financial gain. The market is ever-changing – and you can’t afford to be spooked by spikes and drops.

Turn off your emotions

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Indeed, Medium has advised those going into the industry to ‘turn off’ their emotions. Particularly when you’re planning for a short sale, you need to ensure that the fear of loss is dialled down because it’s likely to happen often. Everyone faces loss at one point or another. It’s likely that profit will be missed on occasion, and it’s important that traders don’t spend too long thinking about what they’ve just lost. The best traders see every loss as an opportunity to learn.

Experienced trader Nick Cawley explained: “My worst trades – and there have been a few of them – have all been when my best laid plans are thrown out of the window when I lose discipline. I didn’t use correct set-ups and stops; I thought I was ’better’ than the market; I doubled up when I was losing and lost more, and I put more money into my trading account to chase my losses.

‘I lost control of my emotions and traded when I should have looked without any emotion at my position and cut them and moved on. Easy to say, difficult to do, but a must for any trader who is looking for long-term success.”

Take your time

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It’s also highly recommended to build up your position gradually. Trades will rarely pay off immediately, which is why so many people take their time with their decisions. NerdWallet has reminded future investors that time, not timing, is key to delivering strong market returns. For the most part, patience truly is a virtue when it comes to the market. Experts have encouraged people to invest a set amount of money regularly, meaning the average price you’ll pay is evened out. 

As Investopedia notes: “Exhibiting patience with a good trade setup is a difficult task. It requires confidence in your research and in your system. While no one is infallible, the best traders trust their discipline to make them successful. They do not waver from their trailing stop methodology by letting the trade play out. If it incurs a loss, they capture all the relevant information to assess what went right and what went wrong.” 

Stay within your means

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Don’t spend all your money in one go – and never go over your means. A lot of beginners will spend their money in one go, but it’s worth holding back at least half of your funds. If you do find a good investment and you’re seeing returns, you can then make the decision to invest the rest as you see fit. 

You also need to avoid overstretching. By putting too much money into investments, you’ll be taking on too much risk, backing yourself into a corner and increasing the likelihood of making a mistake.

As The Balance notes: “There’s a natural human tendency to want to overreach, to put in more money than you can afford and go for a huge payout and that brass ring. This trait tends to become magnified; the more desperate someone is for money. He harbors the hope that hitting the jackpot will make all his problems go away. Many people below the poverty line are playing the lottery, but not many executives drop their money on tickets.”

Do your own research

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Old pros will tell you just how important it is to do your own research – don’t just take one person’s word for it – and not to commit more money than you’re happy with. Even more so if you’re trading on margin and giving a leveraged amount. When you’re trading, you don’t always own the stocks, for example, CFDs aren’t something you’ll ever own, you’re predicting movements in the market here instead. 

Many people do research before they begin – but, as Markus Reily points out, it’s vital that the process of researching is continuous. He wrote: “After you make an investment, the research should never stop there. Whether your money is still securely within the market, or you’ve sold your shares, keeping up with how a market is performing after your investment or trade can help you determine when the best time to dip back in is. There are countless things that can happen between one investment and the next that affect how you handle the market and keeping up to date with this will better prepare you for the future.”

Try before you buy

Source: teachingforce.co.uk

All of that is sage advice – but you don’t have to rush straight into the risk of the market if you’re unsure how to interpret it or adapt it for you and your trading needs. In order to get sufficient experience, it’s best to look into a demo account first. That way, you can test your theories and strategies in a safe, no risk environment before exposing yourself to undue risk. Remember what worked, discard what didn’t and keep reading and learning from others to improve your knowledge and performance.