Trading is a fine game, but it’s most certainly not for everyone. Many of those who enter the game have ambitious dreams about their soon-to-be-acquired wealth, only to end up so much poorer than they’d started. They pack up what they have left, turn their backs on this endeavor, and find somewhere to tend to their wounds. And, there are some individuals who are able to thrive in this challenging environment. So, what’s their secret?
The secret with the game of trade is that you need to be prepared. Jumping right into the game is not only risky, but it’s also disastrous. To minimize your losses and maximize your profits, there are some aspects that you need to be very familiar with before you start.
If you’re thinking about getting into this game, here are 5 aspects of trading you should know about:
When people start going into trading, they try their best to mimic their trade heroes. They study their techniques to the T, they go to seminars, take online courses, and some even get coached by gurus. And yet, they still fail. The reason behind this is that everyone has a different mindset and personality. Blindly following the actions of someone else won’t guarantee you the same results; simply because you’re both different individuals of different experiences and backgrounds.
The first thing that you should do is understand what kind of trading and what strategies suit you: your personality, your understanding, and your experience. Someone who has vast experience in the intricate financial details of a whole company will be able to notice things that an amateur will completely miss. As a result, a seasoned trader will be able to nail value investing while others will fail at the same approach, even if they followed in the trader’s footsteps.
Winning the game takes a lot of preparation and studying, and you just can’t win without having a solid strategy. In fact, seasoned traders are known to specialize in one or two strategies, while having sufficient experience in other strategies to use whenever they feel necessary. There are four most commonly used strategies when it comes to trading: Scraping, Day Trading, Swing Trading, and Position Trading. Each strategy has its own tactics and methods of playing, and you’ll never know which one is for you without experimenting with each of them.
Aside from the known strategies, trading can be done through various methods. For decades, trading has been conducted by studying the charts and making predictions – all in a manual matter. However, recent years have seen a great increase in algo trading systems; systems that depend on algorithmic programming that account for all the variables that successful trading depends upon. The reason these systems have become so popular is due to the many advantages they bring to the table; such as cutting down on costs, delivering faster and more accurate results, their flexibility, implementing diverse strategies, and, of course, returning more profit to the user. The fact remains, however, that if the system isn’t devised correctly, it can be much more costly than manual trading. It all depends on the reliability of the system you’ll use.
Learning all the strategies and using every different method still won’t guarantee you success. There’s a critical factor that you need to build a full understanding of; that’s the market and its everlasting fluctuations. If you’re unable to predict where the market is going based on the tiniest of signals, you’ll just go in blindly. You need to understand how it operates, even if that means standing on the sidelines studying these fluctuations and not participating at all. You’ll be all the wiser for doing so, and your next game will be spot on.
When you feel that you’ve sufficiently prepared for trading, it’s time to plan your game itself. Do you know the capital requirements, and do you have an additional margin of capital in case something goes wrong? Do you have your goals set? What form of constraint have you placed for yourself? The game can quickly get addictive, and you need to know when to stop. Before starting, you need to calculate the risks you’re taking very well, and you should have a backup plan to fall onto.
There’s a reason that trading isn’t for everyone. It takes vast amounts of knowledge and expertise combined with skill. Individuals aspiring to ace the game should take everything into consideration, understanding full well how a trader’s mindset plays a big difference in the game. They should study and practice different trading strategies, a figure which trading method works best for them, and understand the market fluctuations. Finally, the way they play their game settles the final score.