Online trading

An entrepreneurial approach to online trading

Understand the core tenants of online trading and get advice on how you can succeed at trading online

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First, understand that online trading is not the same as making a purchase from a local retailer through set prices. Investments are always placed in real-time where bidding is then carried out by the sellers and buyers. If you want to trade online, there are some ground rules you must abide by to achieve your goals.

Related: Understanding online trading

Make a plan and follow it

There are rules that stipulate the exit, management of money, and the entry of the trader. Today, online traders are not limited on what to choose for trading. They can choose currencies, futures, commodities, exchange trade, funds and bonds. Before risking online trading and losing money that could have been invested elsewhere, research widely and test your idea first to determine if it is indeed viable. If you feel it is will be successful, always stick to the predetermined plan not to risk destroying its success. Although making and following a trading plan may seem daunting, consistency is what pays up. Following the trading plan means not deviating from what has already been set in the rules and in this case, rules were not made to be broken.

Treat it like a business

Online trading is highly unpredictable, and trading does not come with a monthly paycheck and so, it can at times be discouraging when you don’t see instant results. This is why you must approach it as a business. Every business will at some point incur taxes, risks, losses and expenses and doesn’t always make money at the beginning. These are the elements you must look out for in online trading. Your trading will only be truly successful if you follow the plan. If you intend to trade for a long time, you must cultivate enough time for intensive research and ensure your overall plans address your long-term commitment.

Don’t commit all your money at once

Most new investors in online trading think that it will work out the way they have planned or according to what someone has told them. Understand that your choice could fail, only trade with what you can lose, so you are sure it will not impede your ability to meet other financial obligations in case what you try to trade is lost. It would impact on you heavily if you risked investing capital you shouldn’t have. For instance, do not fund your account with your mortgage finances. It is vital to keep in mind that trading with non-expendable money can get you into a lot of pressure to succeed. This is the kind of pressure that has been known to lead to major losses and poor decisions.

Prepare an exit strategy

As you make your entry plan, have your exit strategy prepared. Also known as ‘Take Profit,’ it is the predetermined rule of profitable closing positions. Determine how you will get out of your losses and wins. Understand that the exit is what matters, not the entry. This is the point that determines if you leave the trade as a winner or as a loser. For you to be successful, you must choose your strategy carefully. There are three basic strategies, including:

There are two reasons you should stop trading including:

If you are losing more than expected in your online trading, it is time to quit. Sometimes, the plan set for trading may not always work as anticipated. Find it necessary to quit and re-evaluate your strategy. It does not have to signal the end of your trading experience but should be a chance for you to solve the problems in your plan first before resuming.

When a trader is ineffective, elements such as bad health and external factors such as stress may have contributed. Even with a good plan, your trading experience can fail if you do not execute it properly. Although there is much to ponder on in online trading, following the principles mentioned above can quickly get you off to a great start.

Related: Recognising Trends in Forex Price Movements