In order to offset the risk of losing money, it is essential to follow the best trading tips. There are many trading tips that can help you through your trading journey. Here what i believe are the top 10 trading tips for beginners.
Learn basics first
If you are a beginner, you have to learn many important aspects of the market. The basics include;
What are the active trading times?
What makes the financial market fluctuate?
What different types of Orders are there?
What are the different terms used in trading?
The more you know about the market, the healthier your risk profile will be. Don’t jump right into the market with no real background knowledge on the markets.
“Good fortunes is what happens when opportunity meets with planning”- Thomas Edison. Every trader should have a trading plan with a solid structure that can guide through the day-to-day fluctuations in the market. With a good plan, you will mitigate losses and also be able to remain calm if the trade gets volatile. The plan should include profit goals, methodology, as well as risk tolerance strategies. Nearly every mistake traders make it down to either not having a plan or not following it.
“Rule No.1 never lose money. Rule No.2 never forget rule number one.” Taking losses is a part of trading. Never risk too much on any single trade and always use stops. A stop-loss helps you reduce your losses as it lets you select a price at which your position will be automatically squared off, but you have to place your stop losses at a ‘safe’ distance away from your entry price. If you place them too close you will get stopped out for a loss before the market really had a chance to move in your favour.
Don’t underestimate the market
Every good trader endures loss. The difference between a successful trader and failure understands how to handle the loss. Whether we choose to accept it or not, losses are an integral part of trading. Always be prepared for market volatility and if the market is not moving your way, exit any positions to cut losses. This will help traders reduce their losses.
Diversify your Investments
It is important to remember that some assets affect one another, so it is best to diversify between different asset classes (such as stock, commodities, indices etc.), and even within the asset class itself. The logic behind diversity is as old as the saying “doesn’t put all of your eggs in one basket,” and keeping your investments diverse will also help you make up your losses in cases where one stock brings in losses.
Be patient and disciplined
Trading consistently requires patience, which unfortunately most humans lack, particularly when it comes to money. Attempting to double your account each week is chancy, and attempting this feat will increase risk exponentially. Making sustained profits in trading takes time and effort, and there are no shortcuts to becoming a good trader. So once you have your trading plan ready, have the patience to stick to your rules because Patience is not about doing nothing; it’s about doing the right thing at the right time.
Control your emotions
“If you cannot control your emotions, you cannot control your money”-Warren Buffett. Sometimes, even experienced professionals with advanced tools are not able to predict market movements and in that time emotions drive you to take negative actions. Make sure you do not let this happen – without too much emotion you will be making adequate choices and take your time to understand each one of them.
Have entry and exit rules
There is no such thing as the ‘perfect entry and exit’. Stick only to the entry and exit parameters in your plan. If you start thinking ‘maybe I should see if this works’, think again. Maintain discipline and your bottom line will thank you for it. The exit strategy will be based not just on your goals but also the market trends; this will minimize your losses while you can collect your gains when the specified target is met.
Take partial profits
If you gain and want to trade further, it’s time to take partial profit. Try to book at least 50 per cent profit at your desired level of gain. At the further level, you may book another 25% and at furthermore book the rest of the profit. This will decrease your risk and at the same time give you significantly increase profits.
Be Knowledgeable of news events
News events develop rapidly, causing explosive fluctuations in the market. So In order to succeed in trading, you need to be up to date with the latest events affecting markets, the latest stock market happenings and other things concerning the market. This helps you for example, when a notable event appears on the economic calendar, it may be prudent to consider booking, or at least protecting, profits, in any products you feel might be affected. For short-term traders, it’s important to keep an eye on the markets and any real-time news developments.