To beginners, trading sounds like a gold mine which can be just struck once or twice and then gives unlimited profits. But the reality is that trading in the financial markets and consistently making profits is not an easy thing to do. A trader needs to have multiple qualities like patience, quick wit, decisiveness, and emotional control to succeed.
While more than 80% of newbie traders soon quit after making losses instead of profits, the remaining 20% stay in the game because they have more realistic expectations and perseverance. Today, we’re going to see how you can avoid being washed out like the majority, and we’ll learn the tips that are universally followed by the most successful traders.
1. Start Small
It is always advised for beginners to start small as it would prevent 2 key things from happening in the event of a loss. First, it wouldn’t take down all of your savings in one blink of an eye. Second, even if you suffer losses you’ll be able to comfortably bounce back and learn.
Many traders make the mistake of investing huge sums of money which they’ve been saving up for the last 5 years. And this happens all because they acquired confidence due to some early successes. Avoiding this mistake and learning in-depth about how stocks work makes the probability of finding profits much higher.
2. You’ll Have to Work
Many newbies enter the market with an unrealistic expectation of getting filthy rich by doing the least amount of work. What you need to understand is that trades don’t yield nearly as much money as you might think. Sure, traders do make a lot of money if they’re good at it, but that doesn’t happen right away, it takes time and accumulation of larger sums to be invested.
Many people even think that automating their trades will do the work. But they fail to understand that it can as easily empty their account if they’re not cautious. Many newbies dream of fully automated profit-making scripts but read more here about why it might be a bad idea. Experts have always advised against automation because if you can’t handle trades manually, then you can forget about being profitable with automated scripts.
3. Discipline is Key
For a trader, discipline is just as important as it is for a soldier. It can’t even be taught in any class and many traders keep suffering continuous losses over many years due to their lack of it. If you want to make it big in trading then you’ll have to learn to follow through with your plan.
You might be able to make a foolproof plan at first, but as soon as you make the first trade the emotions get a hold of you. This happens to everyone but the pros know that it’s a part of the process and will control their temptation. As soon as you make a lucrative profit or a crippling loss, you have to keep on course and ensure that your initial plan reaches fruition.
4. Knowledge is Supreme
As a trader, your knowledge should be up-to-date with everything that’s even remotely related to your trades from economic outlooks to the other minor factors affecting the stock prices. You have to be well versed with all the terminologies and the basic protocols. If you don’t have a crystal clear understanding of anything at all then you must find out about it as soon as possible.
Without the proper knowledge and research, you’re more inclined to be making poor decisions based on impulse. And as mentioned many times earlier, there’s no place for emotions in trading. It’s an all-out war, and you have to keep a ruthless mindset accordingly.
5. Timing is Crucial
When you’re trading in a market that’s highly volatile and arbitrary then you have to ensure that time is on your side. If you take things too casually and don’t execute the right trades at the right time then you’re going to be making more losses or fewer profits than you would’ve had if you were on time.
Many traders who have experience under their belts know that -starting early in the morning when the market opens- contributes to volatility. Even though the closing time rush hour has many opportunities, beginners shouldn’t delve into this side of trading.
These are only some of the many tips that you could use when trading. But if you utilize the above-mentioned tips and implement them properly then you’re guaranteed a steady increase in your profits. Just go slow at first, and you won’t regret it, since not making mistakes is not an option and mistakes will only help you improve. If you don’t dive in headfirst then you’ll have a better idea about how the trades actually work, and soon you’ll be among the top traders whom everyone admires.