Business

Learn to trade the right way

posted by Chris Valentine

According to statistics, most people lose money when they start trading. Trading what? It doesn’t really matter – it can be stocks, it can be forex (foreign exchange, currencies), it can be trading metals like gold and silver, or trading cryptocurrencies for example. And you can often trade all of those things through the same broker or same platform.

However, you may have noticed that whenever there’s an ad about some trading platform, they also mention that there’s a significant chance of losing your money, and not some of it but all of it. And no, you may even know what you are doing but still lose it all. You may know EVERYTHING, but if you don’t have the discipline to stick to what you know, act on how you know you should trade, then you’ll end up losing. So before you even consider trading for a living, you should think whether you have the discipline needed for it.

Your education

These days everyone can open an account with a forex broker, deposit $100 bucks, download Metatrader, and start buying and selling the different currency pairs. But if you want to do it successfully, you need to educate yourself or otherwise a lot better idea would be buying a lottery ticket online, your chances of winning might be higher. Start with the trading basics, learn the vocabulary, learn about Japanese candlesticks, about trading indicators. While this all might have sounded like…well, easy, there’s lots of information to be learned, and you should do it all. Of course, you could start trading with minimum amounts already while learning it all, just to see how it all works at the same time.

Your initial deposit

While your initial deposit can be small, and just for testing purposes it’s all good; when you start trading seriously your deposit amount should be big enough. It’s for two main reasons. Firstly, you shouldn’t risk more than 2% on any given trade. Just to be on the safe side. Secondly, while you always CAN risk 50 or even 100% of your capital on just one trade, imagine losing just 20% of your capital in a moment. Psychologically it can influence you a lot, and cause you start making poor decisions. In poker it’s called going on tilt.

Leverage

When you are trading currencies, the brokers gives you a leverage of up to 1:5000 (although usually it is up to 1:500). It means that while you might have just $100 on your account, you can actually trade with 100 x leverage. While it means that you can earn a lot from just a little, it also means that you can lose from the same amount. So the 100 on your account might be gone faster than in 60 seconds.

Your stop-losses

Always take advantage of stop-losses. Even if you have decided that you are willing to wait for the price to move a lot, you should have at least some sort of stop-losses in place.

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