New traders that are wishing to begin trading online often find themselves in a conundrum of confusion, largely due to the complexity and complicated nature of financial investing. This overwhelming bombardment of conflicting information can leave beginner traders at a loss as to where to begin to not only educate themselves about CFD trading, but also the initial steps required to take when first beginning to trade CFDs.
So in order to shorten this learning curve, we’ve developed a 7 top tip list that outlines exactly where to begin when trading online and the steps to take to begin your investing ventures.
Tip 1: Protect Your Capital
Protecting your capital sounds obvious. However, to effectively do this, it’s important to understand that this doesn’t just come down to trading small amounts of your capital. It’s
also about reducing your risk and exposure to unprofitable scenarios. Protecting your funds (no matter what your account size) is paramount to success when trading online.
For those new to trading online, it’s dangerous to believe you’ll enter the markets, make bucket loads of cash, and then exit swiftly in a matter of days. Unfortunately for those who are new to this form of investing, this is just not a realistic goal to set for yourself. Instead, your focus should be on preserving the capital you invest in the market, and keeping this money in your pocket, and out of everyone else’s.
Once you test and improve strategies and improve your trading knowledge and skills, then you can have a more aggressive approach to your trading.
There’s no point developing highly detailed, successful trading strategies if you no longer have any funds to trade with. Aim to keep your losses to a minimum, before prioritising maximising your gains. The best way to do this is through risk management.
Tip 2: Set Realistic Trading Goals
Setting realistic trading goals will not only keep you disciplined in your trading ventures, but it will also outline exactly what you want to achieve, in what period of time, and will allow you to measure your success accordingly.
The key here is the term REALISTIC, so setting a goal of earning a six-figure income over a one month period so that you can buy a swanky new sports car unfortunately does not conform to the nature of achievable goals. Start by setting SMART goals, which are specific, measurable, accurate, realistic and timely.
First and foremost, your first goal should incorporate the first tip discussed above, and that is to protect your initial capital. Survival is paramount to success when trading online. Evaluate your account size, the amount you’re willing to invest, and what you can realistically expect to gain from your trades. Focus on your trading goals daily, re-evaluate them when necessary, and keep your eye on the prize (the prize being your SMART goals).
Tip 3: Keep a Trading Journal
Keeping track of the trades you make in a trading journal (or spreadsheet) is an important component that should be included in your overall comprehensive trading plan (discussed below).
Reviewing your trading activities will enable you to gain clarity and understanding on the reasons why you executed a trade, why you didn’t, why you made the decisions you did and also highlight any recurring patterns that you need to change.
Whether your trades earn or lose you money, hindsight is one of the most powerful educators, and having a detailed review will allow you to look back on your thoughts and strategies and evaluate the good, the bad and the ugly. Analyse what worked, what didn’t and learn from your wins and losses.
The following is a list of the key facts you should keep in your trading journal:
Entering in to a position:
* What instrument was purchased, whether it was a long or short position, and the amount invested
* Whether or not you added to the position and why
* Date/time you entered
* Underlying reasons that made you take the trade
Exiting a position:
* Where position was executed & whether it was a partial or full exit
* Date/time you exited
* Underlying reason for exiting
* Profit/loss of trade
Other data to review includes how many winning trades to losing trades (win/loss ratio) an how big your winners are to your losers (edge ratio).
Tip 4: Have a Comprehensive Trading Plan
A trading plan is the singular, most important aspect of your trading ventures (so much so that we have dedicated a whole article on how to develop your own. Not only will this keep you disciplined when trading online, as well as outline exactly what you wish to trade, it will also give you the much-needed confidence to actually execute your desired trade, an often-difficult task.
Your trading plan should encompass every aspect of your trading ventures, including your entry strategies, exit strategies, risk management, money management, resources required, etc.
If you’d like to learn how to develop your own comprehensive trading plan read our 6 Essential Steps for Developing a Successful Trading Plan
Tip 5: Remain Disciplined
You may think that once you have successfully developed your plan for trading online that it all ends there, that you’re so prepared to take on the live markets that you’re practically jumping at the chance. Unfortunately though, your preparation doesn’t end there.
Kudos to you for getting this far, you’re already one step ahead of many others in this field, however the most important aspect of a trading plan, is your ability to actually stick to it. It’s all well and good having a highly detailed, comprehensive plan that encompasses your pre-determined SMART goals, as well as your action plan to get there, but if you don’t actually follow through with this plan and implement these steps, then the profits you set and goals you outlined will never come to fruition.
Trust in yourself, and trust that the plan you developed will lead you to your desired success.
Tip 6: Be Patient
An unfortunate reality is that profiting in trading can sometimes take time. You may make it big on one trade over a month long period, and then lose half of it in a matter of a week.
This is when patience is a key determinant in successfully trading online. Rome wasn’t built in a day, and neither will your trading portfolio be. Be patient, be persistent, and stay disciplined.
Tip 7: Keep a Positive Mindset
Keeping a positive mindset may seem like an easy enough thing to do, however when markets are experiencing extreme levels of volatility, or a trade you made has completely backfired, it can be difficult to keep a smile on your dial.
Don’t be discouraged by small losses and let this impact your confidence. So long as you follow and implement your plan and follow your risk and money management strategies to a tee, small losses are just a cost of doing business when it comes to trading.
Trading Online: The Bottom Line
Initially, trading online can be an overwhelming and even daunting experience if you’re new to the markets. However, if you can successfully adopt the tips detailed above, and incorporate them into your trading preparation, then you will be more likely to avoid this uncertainty and be better equipped to begin your trading ventures.