Just because you are a beginner doesn’t mean you have to make mistakes. Sure, when you decide to take the plunge and become an investor, it can be very daunting. What should you invest in? Who can you rely upon? Most importantly, what will happen if you make a loss? At its core, trading is not that difficult and it can bring high rewards for investors. But, the biggest problem for traders is that they often get tripped up by speculation, emotion and poor advice. If you want to reach your long-term saving goals, trading is the quickest route you can take and it doesn’t have to be an arduous and stressful process.
How can you make this happen? There are some do’s and don’ts that rookie investors should know when they decide to venture into the world of trading. These can help them in avoiding mistakes that most beginners make and end up losing their investment. Read on to find out what they are to ensure you take the right path:
Do: Lots of research
Before you decide to lock your hard-earned money into the forex market, stocks, cryptocurrency or any other financial instrument, you need to ensure it is worth investing in. These days, information is easily accessible because you don’t have to venture out to find what you are looking for. You can do your research online and discover the pros and cons of trading each of these financial instruments before you make up your mind. Exercise caution when you are making a choice and ensure that it is in accordance with your risk tolerance.
Don’t: Attempt to time the market
This is simply not possible. There is no such thing as ‘winning’ stocks, cryptocurrency or currency pair. Every asset has its own ups and downs and you cannot predict which ones will always move in one direction. Therefore, rather than wasting your time trying to do that, it is better for you to trade multiple assets that can give you a positive aggregate. Diversification will always pay off in the long run, as long as you do it right.
Do: Learn about diversification
What is diversification? Most traders believe that making multiple investments is diversification. However, the key to know is that it is not just the number of investments that matters; it is also the type of investments. If you are trading multiple currency pairs, your portfolio is not diversified. But, if you decide to trade some currency pairs, some stocks, some indices, and some crypto, then you will be considered a diversified trader. These days, there are many cryptocurrency exchanges to choose between if you’re interested in crypto.
Don’t: Let your emotions get the better of you
Emotions and trading need to be kept separate. It doesn’t matter if they are positive or negative emotions; both can actually be destructive to your trading goals and earnings. For instance, if you become attached to an asset, you will continue holding onto it, hoping that it will recover in the future, but this only increases your losses. Likewise, panicking and selling an asset because it suffered a decline can be costly because there is a chance that it will make a recovery and your losses will be minimized. Instead of letting your emotions take the rein, you need to look at the cold, hard facts because these are what really matter. Use data for making calculated decisions and you will be able to fulfill your goals.
Do: Pay close attention to trading fees
On paper, you may have very impressive returns and you will be pleased with what you have made through trading. Unfortunately, there are fees to be paid to the online broker you are using and there are other trading costs to be considered. When you subtract all of that, you realize that your returns are not that impressive as you initially thought. Therefore, it will literally pay you if you do thorough research before you sign up with a broker and consider all trading fees and commission before you begin.
Don’t: Waste your time
There are hundreds of people out there who want to trade, but continue to wait for the ‘right’ time. You need to understand that there is no right time to enter a market. The biggest advantage of trading is that there are no barriers to entry and you can buy and sell the instrument that appeals the most to you. However, if you keep on waiting for the ideal conditions, you might be missing out on a lot of opportunities. Rather than waste your time, you can start slow and build up gradually by expanding your investment.
Do: Learn as much as you can
One thing that you need to understand about the trading world is that your education is never complete. The trading market is a very complex one because there are thousands of instruments that can be traded and they all belong to different categories. Likewise, technological advancements and innovations continue to make new changes and news and events also have an impact. There is always something new to learn and see in the market and you need to ensure you are on top of any changes and trends in order to make the most out of your investment. You can find this information online and even your brokers will provide you access to valuable content that can be used for learning purposes. Read this Bitcoin Era Review to learn more about a reliable broker you can work with.
These are some of the essentials that every beginner needs to understand when they are just getting started. Obviously, you don’t want all your money to go down the drain. The only way to make it happen is to play it smart and follow the do’s and don’ts that are mentioned above. If you stick to these rules and stay consistent, you will be able to make the right decisions with your trading. It will go a long way in boosting your profits and minimizing your losses.