Are you looking for techniques and strategies to increase your effectiveness as a trader? It only makes sense to pursue methods that can boost profits during the early months of a new year, especially when the economy is in an iffy place. For most people who put capital at risk in the markets, step one is choosing the right asset or assets. Even more critical is connecting with a broker who has a solid reputation and caters to customers with your level of expertise.
Along with a respected brokerage firm, be sure to get access to a platform that includes the features you feel are essential for buying and selling the assets you choose to focus on. Beyond that, take the time to educate yourself about the current state of the markets. Acquire basic knowledge about technical indicators, automated trading systems, money management, and demo accounts. Don't forget to spend a few minutes at the start of each trading session reviewing current economic and financial news. Here are additional details about tactics that have the potential to boost your return on investment.
Asset Selection
Don't waste time and energy attempting to trade assets that don't interest you. Most people have a gut feeling for one or more categories, like stocks, forex, precious metals, energy commodities, index funds, etc. Chances are that you already have a clear idea of what kinds of things you want to buy and sell. If not, consider experimenting with either forex or equity shares (stocks). Both markets are highly liquid, offer multiple choices within their categories, and are exciting to trade. Try to stick with just one asset class for a few months before changing to another. That way, it's possible to gain in-depth knowledge of a particular market via specialization.
Find the Right Broker & Platform
Review a few beginners trading guides available on the top brokers' websites. The guides contain core knowledge that can help jumpstart your efforts and make it much easier to avoid common errors. Of course, finding a competent and respected broker is a game-changer. Working with a firm that has solid experience and a reputation for ethical practices is the foundation of any trader's long-term success.
Among the best online brokers, account holders get the chance to choose from several platforms. Be attentive to this step in the process by experimenting with each platform to see which one feels like a good fit. Note that some are more geared toward stocks and options, while others are designed to handle forex, commodities, precious metals, futures, and other asset classes. The other piece of the puzzle is your level of knowledge about the markets in which you'll be most active. Do research on the history, average price swings, unique characteristics, and other pertinent details about your preferred markets.
Learn Technical Basics
It's always worthwhile to bone up on a few of the most popular technical indicators, like moving averages and price channels. There's little calculating involved because the indicators are algorithms within the trading platforms' apps. However, it's wise to study the reasoning behind the indicators and select several that fit well with your philosophy about how markets and asset prices behave.
Millions of individuals and organizations use moving averages to estimate future price action. Most platforms include SMA (simple moving averages) as a core piece of their offerings. The typical way of leveraging the logic behind this indicator is to expect a price rise soon after the 50-day SMA line crosses above the 200-day line. The theory is not foolproof but is a reliable way to at least identify when the major trend is bullish for a given asset.
Practice Wise Money Management
One approach that can protect a trader's capital is wise money management. There are dozens of methods, but one that gets the most attention is called the two percent rule. Simply put never risk more than two percent of the total available capital on a single position. An example is if your account balance is $9,000, limit individual trade risk to $180, which is equal to .02 x 9,000. Experiment with different percentages until you discover the one that matches your personal risk tolerance.
Do a Daily Market Review
Devote 10 minutes per day to review economic, financial, and other major news developments. It's surprising how well-informed a person can become just by checking in with the daily headlines. Among items to watch, focus on corporate earnings reports, foreign exchange topics, commodities price changes, inflation predictions, unemployment numbers, and similar current events. Many of the top internet media outlets offer one-page summaries that cover all the pertinent points.
