A few minutes of internet research is all it takes to be a profitable stock trader. These little tidbits are more of a distraction than helpful advice, especially for novice traders. If you are just starting out in trading, it is likely that you want to know how you can make more money faster.
Each rule below is important but the results are stronger when they are combined. These rules will increase your chances of succeeding on the stock market.
Rule 1: Always Use A Trading Plan
A trading plan describes a written set or rules that a trader uses to specify his entry, exit and money management criteria for every purchase.
Today’s technology makes it easy to test trading ideas before you risk your real money. This practice is known as backtesting . allows you use historical data to evaluate your trading ideas and determine whether it is feasible. Once you have developed a plan and backtested it with positive results, you can use the plan in real trading.
It is important to follow the plan. It is considered poor trading strategy to take trades that are not part of your trading plan, even though they may be successful.
Rule 2: Treat Trading as a Business
Trading must be approached as a full or part-time career and not as a hobby.
You don’t have to commit to it if you approach it as a hobby. If you are looking for a job, it can be difficult because you do not get regular pay.
Trading is a business. You will incur expenses, losses, taxes and uncertainty. Traders are in essence small-business owners. You must strategize and research to maximize your company’s potential.
Rule 3: Make Technology work for you
Trading is a competitive market. It’s safe for us to assume that the trader sitting on the opposite side of the trade is making the most of all the technology available.
Charting platforms allow traders to see and analyze markets in a variety of ways. Backtesting an idea with historical data helps to avoid costly errors. We can track trades wherever we are by accessing market updates from our smartphones. Technology we take for granted such as high-speed internet can significantly improve trading performance.
It can be fun to use technology to your benefit and keep up with new products in trade.
Rule 4: Protect Your Trading Capital
It takes a lot of effort and time to save enough money to fund your trading account. It’s even more challenging if you have it done twice.
Not having a losing trade is not a sign that your trading capital has been protected. Every trader loses. Protecting your capital means not taking unnecessary risks, and doing all you can to keep your trading business afloat.
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Rule 5: Become an investor in the Markets
Consider it continuing education. Traders should be able to focus on learning new things every day. It is important that traders remember that understanding markets and all of its intricacies takes a lifetime.
Hard research helps traders understand the facts. For example, what do the various economic reports mean? Traders can sharpen their intuitions by focusing on the details and learning from others.
The markets are affected by world politics, economic trends, news events and even the weather. Markets are constantly changing. The future is unpredictable and traders need to be more familiar with the market environment.
Rule 6: You can only risk what you are able to afford to lose
Before you begin using real money, verify that the trading account’s funds are not illegible. Traders should save as much money as possible until they have enough.
You should not use the money in a trading account to pay for tuition fees or mortgage payments. Traders shouldn’t think they are borrowing money to pay for these important obligations.
Losing money can be devastating enough. It’s even worse if the capital was never risked.
Rule 7: Use facts to develop a methodology
It’s worth taking the time to create a sound trading method. Although it may seem tempting to believe in the easy-to-print money trading scams, this is not the best thing. A trading plan should be based on facts and not emotions.
Trader who aren’t in a rush to learn often have a easier time perusing all the information on the Internet. You should consider this: Before you can apply for a job or start a new career in a new field, you will need to spend at least a year studying at college. To learn how to trade, you will need at least the exact same amount of research and study.