Now that you have decided to start trading
, it is important to have a strategy – including strict guidelines and rules you are going to follow. Rules are important when trading because they help the investor to stick to their strategies, and remove emotions from the process. Whether you have started trading or plan to start trading, you will soon find that emotions can get in the way of rational investing – and this is especially true when it is your own money.
Develop a Trading Strategy
Whether you decide to be an active trader making multiple trades a week, or maybe a long term investor who wishes to buy and hold, having a strategy will help you trade more securely – whether you trade stocks or ETFs. Let us take a look at a few example strategies here.
One potential trading strategy is
. If the securities price is increasing then the investor would buy to capture the upward momentum. The investor would decide their entry and exit prices which become guidelines for when to open and close. How you decide the exact points for entry and exit are another factor for your strategy. A second method is the
, where the investor focuses on many small gains. These are only two of the many strategies available to investors.
It is also important to understand the time frame for your trades. Are they going to be short term: same day, week, month, or do you wish to value invest where you look for underpriced securities and hold for the longer term to appreciate value. Famous investor Warren Buffet follows this model, and he has done very well for himself over the years!
Regardless of your trading strategy, it is important to have set your rules and follow it rigorously. If you are looking for additional learning material, then Trading And Stock Market offers a wealth of learning material and courses, where any trader can become a better investor.
Test the Strategy
So now that you have your strategy, it’s time to implement it. But, before you go investing real money it is important to test the strategy using paper trades. This training method helps new traders practice and test their trade strategies without risking real money.
With paper trading you are performing the trades you would perform in the real market but on ‘paper’ instead of with real money. You will write down your entry price and you will note the exit price. This will allow the investor to refine and correct their trading strategy until they are confident enough to implement it with real money. Some trading apps allow you to use simulated money instead of real money to begin with, which is another option for testing and learning.
If making your own investment decisions seems beyond you at the moment, or you would rather not create your own strategy, there are other options. NAGA offers an innovative twist on the traditional investing style. This ‘social trading’ app allows you to follow and copy other successful investors – automatically making their decisions your own. This method of investing eliminates the need to develop your own trading strategy. Regardless of how you decide to trade, as a first step you should develop a trading strategy and a set of rules that help guide your trading. The most successful traders have honed their strategies for years.