Did you know that 40% of traders give up within just one month? If you can make it through your first year without losing too much money or losing hope, you’ll be in a good position to move forward. The simple reason for this is that trading is a profession and not something you can get the hang of overnight (be very wary of people who tell you otherwise). You need to be patient and willing to put in the effort it takes to learn before you’re likely to start making good returns. If you stick it out and keep learning, though, your chances of success will rise.
Despite what you may see in the movies and read in adverts by supposed gurus who want to sell you their secrets, trading is rarely a get rich quick game. In fact, you’ll be doing well if you manage to break even or make a modest profit in your first year. Making money isn’t really what your first year should be about – the important thing to focus on at this stage is acquiring the skills that will enable you to make money in the future. It’s also about building up your confidence and your instinct for what works and what doesn’t. This isn’t something anyone can teach you.
Do your research
Even if it doesn’t make you money at first, trading is not a hobby – it’s something that you’ll need to take seriously if you’re going to have a chance of success. Accordingly, you’ll need to take the time to research assets you intend to buy, and you’ll also need to stay abreast of wider factors in the economy and in current affairs – worldwide, not just nationally. The single most valuable thing you can have in trading is information, and although you won’t always be able to find out everything you’d like to know directly, the better your market knowledge, the more you can extrapolate.
Start with a plan
The most successful traders treat what they do as a business and draw up a plan before they begin, modifying it as they go along. Having a clear plan makes it much easier to ensure that you’re fully prepared at each stage and helps you to stay in control. Outline your market approach, identify your goals and make notes on how you plan to work towards them. This will, in turn, make it easier for you to identify which strategies are working for you and which are not.
Take it step-by-step
A lot of traders get overwhelmed because they’re trying to concentrate on too many things at once. You really need to focus on one asset type for around six months if you’re going to be good at it. Of course, this doesn’t mean you can’t get a taste of other things, but don’t let yourself get distracted. If you start out trading stocks, you might want to learn about CFDs online. They can be useful for hedging, and this also gives you the option of changing course if you feel more affinity for them, but don’t try to learn all there is to learn about Forex and bonds at the same time.
Limit your exposure
It’s always a good idea to limit the amount of money you can run to when trading, and that’s never more the case than in the early days when you still have to find your balance. In fact, many people start out by making dummy trades, and you might want to do this for a couple months before you move on to the real thing. This gives you the chance to learn from observation and gain a more instinctive understanding of the risks and temptations involved before you have a lot at stake.
Maintain psychological control
Studies have shown that if you approach trading like a gambler, you will lose. It’s very easy to get drawn in by the thrill of success, to spot patterns where there are none, to start believing that you’re naturally lucky or to confuse being able to acquire money fast with being able to acquire a lot of money. It’s equally easy to start believing that a streak of bad luck is bound to end sometime if you can just hold on long enough. You need to be able to recognize all these psychological traps and establish ways of avoiding them, or you won’t be able to trade successfully.
If you take your time to develop an informed, level-headed approach to trading and put in the effort to learn at every opportunity, you should make it through your first year in decent shape and be able to look forward to greater success in the future.
- Use Your Personal Experience in Forex Trading
- Starting a Home-Based International Trading Business (Part 2)
- Top Contract for Difference (CFD) Trading Tips
- Spread Betting vs Contracts for Difference
- 10 Security Tips to Make Safe Trading on Cryptocurrency Exchanges