Financial markets deliver unlimited earning opportunities. The number of online traders drastically emerged, especially during COVID-19. Users realized that trading is actually not that hard. Mobile and web technologies let them trade across a variety of markets on the fly.
However, that does not guarantee success. More than 90% of all traders fail. And this is all because they do not follow baseline steps to start and get into trading.
In this article, you will learn how to enter the financial market with minimum risks in just a few steps.
Every small thing matters when it comes to trading – from finding a trusted platform to establishing proven and successful techniques. The following steps will help you be better prepared for entering the financial market.
Proper education lets you create a solid trading foundation. Most beginners hurry up to open a first trade without an understanding of how markets work. Users can find tons of information and articles that help them quickly get acquainted with different investment approaches and techniques depending on their personality and preferences.
Are you planning to act as a scalper? Would you prefer to take longer positions with some more conventional assets like stocks? Each approach comes with certain risks you need to evaluate and take into account before moving to the real market.
The second phase is to find where you will trade. Technically, users need to choose a platform that provides all the needed tools. Here you need to consider the following:
Training helps one test his or her strategy without the risk of losing real money. Most beginner traders ignore this stage hoping they have luck without proper backtesting.
A demo account is a great chance to trade under real conditions without investing real money. The same applies to paper trading when users trade with virtual money. Only when you are 100% ready and a chosen strategy works, it is time to deposit.
When we say “plan”, we mean not just steps to apply selected investment tactics. It also involves proper money and risk management steps that will prevent you from losing right at once. The rules here are quite simple. Do not invest more than you can afford. Experienced investors use not more than 10% of their funds.
Now, you are ready to make a first deposit. Make sure your account is verified. Otherwise, you will not be able to get full access to all broker’s features including money withdrawal.
Beginners need to clearly understand that trading is not a game or kind of gambling. Although markets can move unexpectedly, those moves are not random. They take place depending on specific events, geopolitical news, global economic health, and so on.
The key to success is to make accurate price predictions using indicators, and technical or fundamental analysis depending on the underlying asset.
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To start trading from the blank, you need to know several fundamental things. They include major terms and actions that can be applied depending on a chosen strategy despite the asset type.
Leverage is an option for traders who want to trade large positions compared to the amount of cash they have on the balance. In simpler words, you can trade bigger asset volumes with lower funds.
Margin accounts increase the trader’s buying power. Generally, the higher margin requirements are established by the broker, the lower leverage ratio clients will have.
Financial markets are moving rapidly. At times of turbulence, traders find it hard to accurately predict trend moves and asset prices. The key to success is to quickly react to market movements.
The concept is quite simple but requires discipline. You patiently sit and wait until the asset price approaches the extreme zone. Then you enter the market at a reversal area and make your move.
When it comes to financial markets, the bid-ask spread means the difference between the bidding and asking price of an underlying trading instrument. In simpler words, it is the difference between the highest price offered by the buyer and the lowest price a seller wants to get for the asset.
Security with a narrower bid-ask spread generally has a higher demand. However, it also comes with wider price discrepancies.
Having a top trading platform by your side ensures safe and secure operations executed shortly. Leading service providers come with a selection of different trading instruments. Clients are not limited to the most common assets. They can try exotic currency pairs, different ETFs, and tokens in addition to conventional securities, and stocks.
What’s more important, a top trading platform comes with all the needed tools in one place. They include indicators, MT4 trading terminals, news and analytics, educational resources, mobile trading options, and additional products like copy trading delivered out of the box.
Let’s say, you want to purchase a stock costing $19 (bid price). At the same time, a seller wants $20 for the same stock (ask price). Here we have a bid-ask spread of $1. Sometimes, it can be depicted in terms of percentage.
If the buyer potentially agrees on buying an asset in question for a higher price, the spread will close. The same happens if a seller agrees to sell the asset at a lower price.
Never put all eggs in one basket. An old saying still makes sense. It means you should not limit yourself to a single asset. Explore different financial markets and keep your portfolio as diversified as possible. Experienced traders thoroughly pick every new security before adding it to their portfolio.
The approach will keep you more flexible in terms of always moving markets. If some of your strategies fail, you will always have enough backup to recover and make a good profit on another one.
No one will ever guarantee 100% success even if you have the best trading tactics. All traders fail at some point no matter how experienced or talented they are. The same will happen to you someday. You just need to be well-prepared. Losing is a part of the game.
However, knowing the risks as well as ways to manage them will keep you away from epic failures.
Every trader must be aware of the following trading risks:
Additionally, most amateurs do not know how to manage their funds. This is why more than 90% of beginners fail.
Users can find plenty of risk-management strategies. They are closely related to the asset in question. However, some baseline tips help despite a chosen financial market.
Always use stop-loss orders properly. Experts apply technical analysis, indicators, and charts to locate the best place for setting a stop-loss order. A good idea is to set daily loss limits as well to prevent big failures if something goes wrong.
It is very important to keep your risks consistent and take control of your emotions. The key to success is to identify the risk/exposure upfront as well as keep one’s portfolio diversified.
A good idea for amateurs is to explore a copy-trading solution that gives them a chance to enter the market with no prior experience. Clients will be assigned to a proven professional to mimic his actions in real-time and share profits from every successful deal.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.