A decision to start trading shouldn’t be taken on a whim. Especially if you plan on using your life savings (minus emergency fund and retirement funds of course). Trading isn’t a game of luck, you need knowledge and practice, to see any profits. Without these two things, you’re just going to risk your money unnecessarily. Successful traders can make a living through an effective strategy, but you can’t expect such results right from the beginning.
A beginner trader’s main focus should be on minimizing the losses. It’s a risky business, so you have to be prepared for losing some of your money. But setting a limit on your daily loss in the capital is advisable. Once you reach it, simply call it quits for the day. And remember that just because your strategy doesn’t work for a few days, doesn’t mean it’s faulty. If you want to improve your chances, there are a few things to keep in mind.
1. Choose a Market
Before creating your strategy, you need to choose a market. There are three options to go for, and all of them offer good profits. As a beginner, you’ll be better off focusing on one. That’s because different trading methods and requirements are necessary for each of them. And without any experience, it may become too confusing to keep up.
- Stocks
By trading stocks, you’re trading shares of big companies. It’s an option that requires a significant capital from the beginning. For example, if you want to start trading stocks in the US, you really need upwards of around $25,000 to really start trading large stocks. You can start with less than $100, but you need much more to really get into it.
- Forex
There is no set minimum amount you need to start trading forex, so you’ll be able to start with just a few hundreds of dollars. It’s a market where you can trade currencies, f.e., USD or EUR.
- Futures
As in the case of forex, there is no set minimum to enter trading. The amount of money you need will depend on how many contracts you want to buy. You’ll also have to be able to cover any margins. Be careful with future, since you can lose all of your money if you don’t know what you’re doing.
2. The Best Time to Trade
Depending on your other commitments, you will probably be able to spend an hour or two a day on trading. You should choose a specific time during which you’ll trade every day. Regularity will help you achieve better results. There’s another reason why consistency is important.
It’s said that the best hours for trading stocks are the first two hours after opening and the last hour before closing. That’s why you should know which market you’re interested in before you start planning your strategy and include this information.
3. Create a Strategy
When you decide on a market, you can start creating your trading strategy. Take some time to observe live charts and learn from them. Look for repeating patterns that you can use later on.
No plan will be foolproof, because markets are susceptible to fluctuations. But in the long run, having one strategy will give you better results, than trying to react to every move while it happens.
Even the most experienced traders don’t always make beneficial decisions, so you should be prepared for losses. Especially at the beginning, when you’re still trying to gain more knowledge.
To make sure your strategy is a good one, you should try it out first. Set up a demo account and practice. The best option would be to do this for at least a few months before going live. It’s a great way of checking whether your method will work and to gain confidence before you put real money on the line.
If you’re new to trading, you should also think about diversifying your portfolio. It’s never too early to start investing, and while you can see profits from stocks, putting all your savings into one type of assets is risky. If you’re looking for interesting investment options, you can check platforms like VNX Exchange, which enables you to invest in venture capital even with smaller amounts of money.