As a newbie stock trader, you might find that online advice can seem like a distraction rather than actual actionable advice. There are many rules that you can follow to achieve a profitable trade. Any individual rule makes a difference, but all the rules mentioned in this article are stronger when applied together. Here are a few rules that you can follow to find the top trading strategy and start investing.
Use a Trading Plan
In any type of business, working in random directions and not having a specific plan slows down your business’ growth and might lead to its failure. Using a plan in your trading business is key to achieving high profits and ensures your success. To form a trading plan, you must have a written set of rules that specifies the criteria for the entry-exit and money management of every purchase. With today’s technology, you can perform backtesting which is basically testing a purchase beforehand to decide if it’s viable before you have to risk any actual money. When the plan is developed and you have good results from backtesting, you can use your idea in real trading.
Treat Trading Like a Business
To be a successful trader, you can’t treat trading as a hobby or a job, it needs to be your full or part-time business. You can’t treat it as a hobby because you will not form a real commitment to it which will result in your failure. Should you decide to treat it like a job and not a business then you might end up frustrated because you will not get a regular paycheck. Trading incurs similar profits, losses, taxes, and other expenses just like any other business. As a trader, you need to work hard and smart to increase the potential of your small business.
Trading is a very competitive business where you must assume that every other competitor is fully taking advantage of every available technology. To ensure that you are running this competitive race at the same level as other competitors, you must use technology to your advantage as much as you can by investigating
different trading app options. Having your trades appear on a chart will help you swiftly decide when to enter and exit a trade. This will enable you to gain the highest profits possible. You can view and analyze the market in an infinite variety of ways through charting platforms. With this use of technology, you can help yourself as a trader to always be in touch with what’s best for your trading business.
Protect Trading Capital
Any successful trader will definitely face losing trades which is completely normal. What is important is that you become capable of identifying unnecessary risks and necessary risks. Being able to reserve your trading capital as much as possible is important because it is initially difficult to build capital from your traders.
Learn About the Market
Trading is a business where you have to keep on learning every day as the market is a place that can change overnight. Understanding the market is a lifelong process and no one could ever have 100% knowledge of the market. A good trader can help themselves become capable of learning about the market quickly to help speed up their business growth.
Risk What You Can Afford to Lose
Trading is a risky business which makes it very essential that the money in the trading account has only one purpose and that is to be traded at the risk of loss. If the money in a trading account is needed for any other obligations like your kid’s college tuition then it is better to keep on saving money that you can actually afford to use. Losing money is hard and traumatic even if it is not needed for a serious life obligation. It is 10 times worse to lose money that you couldn’t afford to lose in the first place.
There are many other tips and rules for you to succeed as a trader, however, what we have here are the most important and basic there is. An extra tip for you is to always have a stop loss. A stop loss is a specific dollar amount or percentage that you are willing to risk as a trader. This rule should apply to all of your risky tradings to limit your losses. Not following any of the rules on even just one trade could lead to major losses even in trades that can seem profitable. For a beginner trader, avoid any major trades, as you can, that could potentially lead to the loss of the entire amount in your trading account.