Technological advancements over the past couple of years have made trading more accessible than it ever was before.
Yet, getting started with trading and making a profit is still a complex ordeal with little chance of success. This is why 80% of day traders quit within the first two years of starting trading.
Learning how to trade is very important because you take a strategic and systematic approach to trading to avoid risks and maximize your returns. It can be difficult to understand this topic on your own, so we have collected in one article some important tips for traders at the beginning of their journey.
The Concept of Trading
Trading is a relatively old practice of predicting the price movement of a specific asset without claiming its ownership. This means you can predict whether an asset’s price will fall or increase in a given period.
Hundreds of financial instruments exist, including cryptocurrencies, forex, stocks, indices, commodities, bonds, etc. You can predict the price movements of these assets and generate returns when you have done your research well!
Tips to Start Trading Like a Pro!
Getting started with trading can be an overwhelming experience for anyone, regardless of their knowledge or experience. But taking the proper steps towards trading can help make things much more manageable.
Let’s check out the step-by-step guide for beginners in trading:
1. Start With Your Market Research
Cryptocurrencies, currency pairs, and indices are known for their volatile nature, where aggressive trading can result in significant losses.
Therefore, before you begin your trading journey, you must first understand the market factors that can affect the prices of relevant products. Reading manuals about trading, watching market movements, staying updated with the news, and researching the blockchain are all useful approaches to determining whether trading suits your goals.
2. Choose the Trading Method That’s Right For You!
Now that you have done your market research, let’s find out how to choose the trading method that’s right for you.
When entering the market, you can choose any of the three methods for effective trading:
· Trade asset pairs directly against each other
You can trade a pair of cryptocurrencies or forex pairs against each other or fiat cash to benefit by purchasing cheap and selling high. This might imply purchasing the instrument before a significant event (for example, Cardano adopting smart contracts) and then selling it once the euphoria has worn off.
Your cash will increase if you do it correctly. If you execute it incorrectly, your money will decline over time due to failed investments and shifting markets. The value of your investments will grow and decrease, but there is no chance of losing all of your money in one trade. This strategy necessitates precise market timing, which can be difficult and time-consuming.
· Trading In derivatives
To trade in the derivative markets, you do not need to possess any financial assets for delivery. Instead, you may "bet" on the markets.
Derivative trading provides far more freedom than merely buying and selling financial assets, but it is also more complicated and only suitable for experienced traders. Futures, options, and perpetual swaps are all sorts of derivatives with their own characteristics that can be employed concurrently.
Leverage is frequently used in derivatives trading, which may significantly amplify earnings and losses. Traders may also create short positions to profit immediately from price decreases, hedge their risks, and execute large transactions even when markets are relatively calm. However, if done irresponsibly, derivatives may also be a quick way to lose money.
· CFD’s
CFDs (contracts for difference) are a sort of derivative that allows you to wager on the price movement of a given financial instrument. CFDs allow traders to place long-term or short-term trades like other derivatives and use leverage without owning the underlying asset.
Unlike other derivatives, CFDs do not entail the purchase and sale of derivatives on an open market. Instead, you just purchase from and sell to the trading platform you use.
1. Choose The Right Tools And Platforms
Once you have chosen the ideal market and time frame for trading, you must focus on choosing the right tools and platforms for trading. The market has numerous platforms and tools for successful and effective trading. Some of them can help beginners learn how to trade. You must evaluate all available alternatives and pick the ones that best suit your investment needs. You must evaluate different technical indicators these tools and platforms offer, including charts, trading indicators, etc.
2. Use Effective Risk Mitigation
Every suitable investment has a risk ratio that every trader must take. Placing the right trades at the right time is crucial to mitigating risk and increasing the chances of generating better returns. You must consider devising an exit strategy to minimize losses and maximize returns.
This means you must have an effective strategy to minimize risks when exiting trading. You must devise this strategy based on all variables in the market, including market volatility, price movements, the latest news, market development, and more.
For instance, when you trade in a flat market with no movement, you’re in a position to lose or win a trade by a mere one pip difference.
However, this is where the flat market protection tool from Olymp Trade comes in handy. It saves you money on a trade if the market price and the closing price have a difference of one pip, making it fair for both brokers and traders.
3. Always Keep Up With The Latest News And Trends
The final step in becoming a successful and profitable trader is accessing all the latest market news and trends. Traders must remain updated with all the latest information. This will help you generate valuable insights about the market and make more informed decisions to ensure better profitability.
Besides, this will also help you better understand how the market works and ensure that you make more informed decisions. You can also consider following veteran traders on different social media platforms to access information about all the latest developments in the market. You can use this information to devise more effective trading strategies that ensure better returns with minimal risks.
Bottom Line
Trading financial instruments in the open market can be challenging for any beginner. Besides, you must also research different financial instruments and the project's performance.
This guide will help you simplify and master effective trading with your dedicated efforts. It’s also best to keep yourself updated with all the latest information and developments relevant to the market to make more informed decisions.
Remember, you’re only as successful a trader as your trading platform!