The coronavirus pandemic has, inadvertently, created opportunities for budding investors who are thinking about trading the markets. For some, it’s something to do with all the extra spare time that comes with staying at home. And, for others, it’s a chance – whether it’s being made unemployed or not – to switch careers and pursue a potentially more lucrative path in life.
No matter if trading is your new side-hustle or fresh full-time occupation, it’s not without risks. With so much information to grasp, it can be tough to know where to start. And it can be even tougher to know how best to return a profit. But taking a few important steps can make all the difference – if you want to make trading work for you. Here’s what you need to consider:
Do your research
You wouldn’t buy a house without first doing your research. So, why would you start trading if you don’t know what’s what? In both cases, your capital is at risk and you’ll want to protect it.
It’s essential you know more about the financial markets you want to trade – and to know the factors can be the difference between profit and loss. From forex to commodities, the strategy and spreads that make a successful trader can vary.
The good news is that it’s easier than ever to do this research. The leading online brokers that are opening up the markets to more potential traders also provide a depth of learning material.
Think about your strategy
If you’re confident in your market knowledge, the next step is to work out your goals – and the most effective way to achieve them. Ultimately, the main goal of trading is to turn a profit. You can do this in a number of ways, however. And it can rest on how long you’re prepared to wait.
Day traders, for example, is about making quicker, short-term profits from smaller movements in the market on a specific day. In volatile times, that can be a risky approach. So, perhaps you feel more comfortable playing the longer game – investing in stocks that’ll deliver in the future.
Your personal situation and attitude to risk could well lend itself to a particular strategy.
Build up your experience
Part of developing a trading strategy is analysing market performance and managing your risk. Sometimes, however, this can only be really done by putting the theory into practice. It means getting that all-important, first-hand experience of trading the markets.
Getting this experience can be a case of trial and error. This can seem concerning when there’s real capital at stake. But, fortunately, many online brokers and trading platforms provide demo accounts. With it, you get all the experience of a real trading environment without the risk.
And, when risk is a core attribute of trading, any way to lower it when starting must be good.