Online trading is all about opening buy and sell transactions for various financial instruments via the internet. The most difficult task is to know when is the best time to enter and exit trades. But there is more to it. The good news is we have some useful tips for you that will help to improve your trading performance.
7 practical tips for online trading
1. Find out whether online trading is for you
It is possible to make an independent income by trading online. It is a short term method of investing money, something like Paul Tudor Jones known as the ‘Market Wizard’ is doing. It is different to Warren Buffett’s approach who advocates long term money investments. So think it well through and decide if this is something you will feel comfortable with.
2. Choose the best online trading broker
You should be able to do online trading on your computer, tablet or smartphone. Most companies offer apps available on all devices, but you should make sure the broker or the bank is regulated by a government agency as for example FCA in the United Kingdom or FINMA in Switzerland. Compare the commissions and other trading fares and start trading wherever you are.
3. Get the necessary knowledge about online trading
Many online courses are available for free. There are also paid versions. Whichever you choose, do not expect you will know everything about trading after taking such a course. Some skills you must develop through practice. Nevertheless, it is wise to get the necessary knowledge before you start online trading. You should learn about pips, lot size, leverage, placing orders and some other basic ideas. It would be good if the trading course of your choice teaches about trading styles and strategies as well.
4. Decide which trading style suits you best
It basically depends on the time you can invest in the trading business. If you can dedicate a few hours in a day to trading, you can choose day trading. If you have just a few hours to do online trading in a week, it would be better to choose swing trading or position trading.
5. Create a good trading strategy that involves risk management
Having a good trading strategy is essential for your success. Not necessarily you have to build your strategy from the scratch. There are plenty of ready tactics to choose from. Find an educator or a prominent trading mentor who will explain a few different strategies for you.
With time and experience, you will be able to adjust strategy to your needs, to take what serves you well and leave what does not. Later on, you can also design your personal strategy.
Make sure that your strategy incorporates risk management. It is so important because this ensures you will not risk too much in a single trade and as an effect, you will not lose all your money. For instance, harmonic trading is a strategy that includes risk management.
6. Stick to the trading plan
Another thing you should prepare is your trading plan. Again, you can choose a ready plan and then adapt it to your own style. It should cover such issues as which market to choose, how much money in the trading account you should begin with, how big your investments should be or how many trades you can take in one day. It is important that you stick to your plan. Keeping a trading journal will help you to monitor your actions.
7. Stay disciplined
Stay disciplined if you seriously think about making money through online trading. Without being persistent you will not have great chances for success. Everything changes, the market conditions will vary from day to day or sometimes even from minute to minute. You should, however, not change your strategy too fast. Nor should you succumb to momentary emotions. Having your trading journal in hand will help you to stay disciplined. Analyse your moves, check what brings good results and what does not. Constantly work on keeping your emotions under control.
Online trading sounds very appealing to many. But it is not that easy as one can think. It requires a lot of preparations and time investment. You should think the decision about online trading through and search for the best solution for you.
7 tips discussed in this article should clarify things a bit. Make your research and stay focused.
Also, check if your broker offers a practice account. Most of the online brokers provide a free demo account. This is a place where you can train your skills and test trading strategies without worrying about the great losses your trading account could experience.
Have a good time trading!