If you’re familiar with the stock market, you’ll know that it’s a place where shares of publicly listed companies are traded. There are many ways that stocks can be traded, such as with a Contract for Difference (CFD).
When trading CFDs, traders are able to speculate on the price movements of an asset, without having ownership of it. Essentially, it is a contract between the trader and the CFD broker in which the difference of the value of the underlying asset from the beginning and end of the trade is traded upon. This means that traders can buy and sell CFDs, with the potential to earn a profit from both rising and falling markets.
We’ve comprised a short list to help you trade successfully in the stock market, no matter your strategy.
Read on to find out more.
Create and use a trading plan
A trading plan is a written set of rules that specifies when a trader enters and exits a trade, as well as the money and risk management criteria for every purchase. Thanks to online trading platforms, you can test your trading strategies easily using a free demo trading account, which enables you to practice opening a position in the market without putting your capital at risk.
You could also use a strategy known as back testing, and use historical data to try out your trading method and find out if it’s viable. The results that you obtain from a plan that has been back tested can then be used to help guide a successful trade.
Trade as though it’s your business, not a hobby
Approaching a trade as though it is a part or full-time business, is one of the best ways to become successful. Treating trading as though it is your hobby can prove far less effective since you’re less likely to commit to learning, and as a job, it could become frustrating as there’s no guarantee of regular payments.
Trading can cause you to suffer losses and encounter uncertainty, risk and even stress, much like owning a business. Research, alongside creating a strategy can help you overcome this.
Utilise technology
On top of gathering data, back testing and testing your strategies, modern day technology can also help traders to access charting platforms, providing them with many ways to view and analyse market data. Technology is your friend, so you should learn to use it to it’s full potential.
You can even use your smartphone to receive market updates on the go, keeping track and monitoring your trades from wherever you are. High-speed internet provides traders with the chance to stay up to date with anything that could affect their investment, hearing current events and news stories as they happen.
Develop a fact-based method
Research, study and time are crucial for developing a trading method that works best for you. Creating a trading plan can be hard work, and with trading scammers on the internet, you should dedicate time to learning and gathering all the information you can before taking your stance on the ever-changing market.
The best place to start is always a trustworthy trading platform, as here, you’ll be able to learn more about stock trading. Remember that many factors can affect the markets, such as economic trends, news events and politics. With the market constantly shifting, keeping up to date with current markets and events that could drive prices, as well as gathering knowledge based upon past market trends will help to sharpen your instincts and get the most out of your trade.
Manage the risks
Risk management is an important factor to consider when stock trading. Protecting your capital does not protect you from losses, but will reduce the extent of the losses that you could incur.
Some trading platforms like CMC Markets will offer leverage trading, which will require you to pay a percentage of the value of the asset you wish to invest in, rather than providing the whole market value of the asset. This will enable you to gain a larger position in the market, adding to the value of your trade. Whilst leverage can help to increase your profits, greater market exposure can also magnify your losses, so make sure you consider the risk of leverage before pursuing it.
There are other risk management tools at your disposal when you trade online, such as a stop loss. This is a pre-determined point at which your trade will close, to prevent your losses from exceeding a certain amount.
With the help of these tips, you could begin to form a successful trading strategy, and prepare to take your stance on the stock market, in the hope to reduce any losses you incur, and make the most out of your capital.
