Seven Trading Tips for Beginners
There’s a lot to learn about trading. Here's where to start.
If you’re new to trading, you might be feeling a bit overwhelmed. There’s a lot to learn about trading, and terms tend to be built on top of each other. Finance is, by nature, complex. Sometimes, information can even seem conflicting, leading to an overall sense of confusion. Where do you start to educate yourself What are the first steps that you should be taking to learn to trade online?
We get it. To help, we’ve developed a list of the top seven tips for beginners. This list will help you begin to learn how to trade online.
Tip 1: Protect Your Money
Though it may sound obvious, protecting your money while you invest isn’t easy. The best way to protect yourself is to understand that trading isn’t just about the money. To trade effectively, you’ll also need to reduce your risk. One way to do that is by limiting your exposure to unprofitable situations.
Whether you have $10 or $10,000,000, protecting your money is critical to online trading success.
When learning to trade online, it’s important to be realistic. Trading is not a tool to get rich quickly. It is unrealistic to believe that you can enter the markets, make a large amount of money, and then exit swiftly in a few days. This is not a realistic goal for new traders. Instead, focus on preserving your capital as you invest it. Stick to safe trades until you’ve really learned the ropes.
It’s safer to take risks when you have more experience- so save risky trades until you’re both more confident and more experienced.
The goal in the short run is to continue trading. You won’t be able to do that if you run out of funds to trade with. Try to learn to minimize your losses first. Then you can learn to maximize your gains.
Tip 2: Set Realistic Trading Goals
Setting realistic goals will keep you focused and disciplined. It will also help you decide what you’re looking to achieve and when. Having a goal will also help you measure whether you’ve been successful or not.
The key is being realistic. If you’d like to see an ROI of 1-3% in a year, that may well be achievable. However, earning a six-figure income in three months is probably not. When setting goals, use the SMART model: your goal should be specific, measurable, attainable, reasonable, and timely.
Your first goal when learning to trade online should be to protect your money. Surviving is the most important element of success when trading online. Determine how much you have, how much you’re willing to invest, and what your likely returns will be. Then, focus on the goals you’ve set and re-evaluate them when needed.
Tip 3: Keep a Trading Journal
While it may sound strange at first, it’s a good idea to keep track of the trades you make in a spreadsheet or journal. List the stock name, the price, why you chose that trade, and whether you earned money on it or not. By reviewing these trading logs, you’ll be able to understand why you made the decision you did. You can review your thought patterns for error as well as see when you were correct in your predictions. These logs can also highlight recurring patterns – whether positive or negative.
Hindsight, as they say, is 20/20. More than that, hindsight is one of the most powerful educators in existence. Having a detailed document to review will let you accelerate your learning by identifying patterns. Identifying patterns is key in not only making but keeping your money.
The following is a list of the key facts you should keep in your trading journal:
• What asset was purchased or sold, whether it was a long or short position, and the amount invested
• If you added to the position, and why
• Date and time you executed this trade
• Why you made this trade
• What your profit or loss is/was
You might consider keeping track of your win to lose ratio (profits versus losses).
Tip 4: Have a Trading Plan
A trading plan is the most important part of your strategy – so much so that we’ve created an article that helps you develop your own . A trading plan will:
• Keep you disciplined as you learn to trade online
• Outline exactly what you want to trade
• Give you confidence in your trading decisions
Your trading plan should encompass every aspect of your trading ventures, including:
• Entry strategies
• Exit strategies
• Risk and money management
Tip 5: Remain Disciplined
Trading success may begin with a plan, but it certainly doesn’t end with one. Trading is something you must learn from every day in order to be successful.
By following the tips above, you’re already a step ahead of everyone else that is looking to learn how to trade online. The most important thing from here on out is to stick to your plan and apply what you’ve learned. If you don’t, your goals will likely never come to fruition.
Trust in yourself and the plan you’ve put together.
Tip 6: Be Patient
Unfortunately, profit can sometimes take time- and the time it takes isn’t particularly consistent, either. You might make great returns in a single trade over a month, and then immediately lose it in a week.
This is why patience is so important when it comes to trading online successfully. Sometimes you will win, and sometimes you will lose. The key is to win more often than you lose. Over time, your return on investment will grow.
Tip 7: Keep a Positive Mindset
Keeping your thoughts positive will help you stay passionate about trading, and that passion will help you keep improving. Keeping positive, though, is easier said than done when markets are volatile or you are losing money.
Try not to let small losses impact your confidence. If you stick to your plan, everything should work out fine in the end. Small loses are the cost of doing business when it comes to trading.
Trading Online: The Bottom Line
At the start, learning to trade online can be an overwhelming experience. There’s a lot to learn about trading, and terms tend to be built on top of each other. Finance is, by nature, complex. Sometimes, information can even seem conflicting, leading to an overall sense of confusion.
However, by following the tips above to avoid uncertainty, you’ll be better prepared than ever to trade online.