Trading is not for the faint hearted, but too many people fail to realize that by investing, they can set themselves up for a comfortable retirement. Before you even consider trading you need to learn the basics. Without knowledge of how the markets work and when to buy and sell, you’re bound to quickly lose your hard-earned cash.
Well-developed trading platforms can help to teach you professional trading strategies. They contain loads of information designed to help you to distinguish between misinformation and accurate data. They will also help you to understand the terms and the trends and indicators that professional traders use with ease.
In studying the trading fundamentals you’ll learn about the various types of markets that include forex, stocks and shares, futures and commodities and many more. And in understanding the basics of these markets, you can then make an informed decision about which markets the best suit your investment style.
Having chosen the market on which you plan to trade, it is then prudent to delve further into the technicalities of those markets and familiarise yourself with the way they work.
Developing professional trading strategies
Once you’re familiar with the markets it is time to start developing your strategies. You should start with a set of trading goals. Then, you’ll need to study the charts and understand the trends in your chosen market sector to start the planning process.
You’ll need a system. Without one, you’re bound to make decisions that you may regret later. It is vital that you follow your system rigidly or else emotions could get in the way and you may make impulsive decisions.
While your strategy may seem simple enough, it is always a good idea to test your plan for a while using a demo app. Some brokers offer demos free of charge. This is the safest way to make your way onto the market of your choice because you don’t have to risk your own money. All the money you use is virtual. Granted you’ll make no money while you test your system, but you also won’t lose out. Use the opportunity to learn when to buy and when it’s best to get out of the market.
Practice makes perfect
Trading is a lifelong learning experience and you’ll keep learning more tricks of the trade the longer you partake in the markets. When you first start to trade, it helps to find a mentor, someone who is familiar with professional trading strategies, who you can bounce ideas off, and who can assist you with trading tips. You can also learn from the professionals, those who have become rich and famous from their huge trading success. Names that come to mind are George Soros and Warren Buffet, but there are many more.
Markets change along with economic fundamentals, and it’s important to recognize when you need to adjust your investment strategy to continue to exploit the markets and maximize your profits.
One of the first criteria that professional traders look at is the price. Careful investors will become familiar with the trends in pricing and will know when to buy and when to get out.
Manual or automated trading which is best?
Today many people swear by automated trading. Why leave your investment to the whims of human error when you can set the parameters on the computer and let an algorithm buy and sell? The problem with this is that there is no human intervention. Humans are equipped to judge trends and make interventions to control risk. This is true as long as emotion does not influence your decisions.
Flash crashes can very quickly wipe out millions of dollars and these are heavily exaggerated by trading programs that overreact to anomalies on the markets. Manual trading leaves the power in your hands. You can still use the power of the computer by setting up automated alerts to prompt you to buy or sell when certain conditions are met. The jury is out on which of the two methods is superior. You be the judge.
Mitigate the risk
Let’s face it there are no certainties when it comes to trading, but you can take steps to mitigate your risk. Do your homework before you start trading, use a demo, find a mentor, understand the trends and learn from the experts and you’ll soon start to build your fortune.