BTC $20304.07 (-2.7%)
ETH $1163.83 (-3.2%)
USDT $0.99 (-0.0%)
BCH $106.21 (-5.0%)
BSV $58.41 (-3.5%)
LTC $53.33 (-4.7%)
BNB $232.32 (-0.7%)
ADA $0.47 (-2.3%)
DOGE $0.06 (-6.8%)
BTC $20304.07 (-2.7%)
ETH $1163.83 (-3.2%)
USDT $0.99 (-0.0%)
BCH $106.21 (-5.0%)
BSV $58.41 (-3.5%)
LTC $53.33 (-4.7%)
BNB $232.32 (-0.7%)
ADA $0.47 (-2.3%)
DOGE $0.06 (-6.8%)

Tips to Become a Trader in the Financial Market From Scratch

Tips to Become a Trader in the Financial Market From Scratch News
  • Nowadays, people from all walks of life have begun exploring trading.
  • Users can trade safely, make a portfolio, do journaling, and trade assets.

A couple of years ago trading in financial markets was something new and undiscovered to most people. Some thought of it as a thing that only highly skilled professionals can do. Some regarded it as a scam and were afraid to even try. Meanwhile, there were people who tried and gained a little or lost their capital. And while some traders managed to succeed, their number was much smaller than those who failed.

Nowadays, people from all walks of life have begun exploring trading in the face of a growing financial crisis. No one expected the pandemic to shut down businesses all around the world for years to come. Everyone understood the need to diversify the financial flows.

Additionally, the good old forex trading obtained some new “allies”. Right now, anyone can trade stocks, currencies, crypto assets, bonds, options, futures, even fractional shares. You can trade BTC in Canada and stocks in the USA. Depending on your location, lots of markets might be open to you at your fingertips.

Even though trading itself hasn’t become much easier since its early times. Let’s explore how to become a trader from scratch in these days of financial markets flourishing and taking us to the next level of the economy.

Trading safely

What is trading safely? Is it trading with your mask on and with a bottle of antiseptic on your desk? Of course not. Trading safely is when you’re mindful of the money that you spend on trading.

Of course, you might have heard this phrase a thousand times – do not trade more than you can afford to lose. But when markets are raving and brokers offer you trading with leverage, it’s so difficult to say no. However, you should. Think of how much earnings you want to make out of trading for a year. Let’s say, your salary is $80,000 and you want to make the same amount. If you break it down into weeks, it means that on average you should make $1,600 a week. It’s not that much, right? So if you trade consistently and little by little, you can end up earning more than if you would if you try to get rich overnight.

Not every trader starts the trading path by formulating a financial cushion for them. Unfortunately, the psychology of the majority of the traders is boiled down to the event of trying to get rich fast. As a result, they put the biggest part of their money into trading without strategizing for a long-term perspective. Then, if the market moves not in the direction that they expected they might lose their investments over a short period of time which is not very efficient.

Financial experts point out that the average size of the financial cushion should be the amount of money that you would spend on living expenses from 6 to 12 months. If you’ve got as many funds in the bank account then it becomes relatively safe to talk about investments. But be careful – the money you want to spend on trading should be the amount that you hold on top of your safety cushion amount.

Make a portfolio

Next thing that you want to do as a trader is making a portfolio of your investment. Big stockbrokers make portfolios all the time instead of investing in 2 to 3 sources. And there is a good reason why. They are hedging and diversifying.

What are hedging and diversifying? It’s simple. Without diving too deep into economic terms, you need to understand only one concept. Traders want to invest in assets that show completely different behavior. Inverse proportion is even better. They should correlate negatively.

Imagine this: you invest into two assets that have contradictory behavior. It means, when one asset goes up, another goes down in price. That way, if it is possible to do shorting (borrowing and then selling), then you earn on both assets – the one that becomes more pricey, and the falling one.

That’s why you need a portfolio of different assets. You don’t want to rely solely on Bitcoin, for example. But if you invest in different assets, you have more chances to earn on their price movements.

Journaling

Journaling is a useful habit for novice traders. Naturally, you’re going to do many trades. Most likely, you also have other things in life – like going to a day job, hanging out with your family and friends, taking kids to school, etc. That’s why it’s virtually impossible to memorize each and every trade that you did.

Keeping track of your trades helps you to spot your mistakes and what’s more, certain patterns in trading. For example, if you’ve just got into technical analysis and you have no idea what those patterns are and how to spot them, observing the charts and writing down your observations is an extremely useful tool. It helps you learn faster and therefore, becoming a better trader faster.

Trading assets

Try trading different assets and markets to figure out which one suits you best. Even if you’ve only started trading today, developing your style is a good thing. You need to try and see whether you like intraday trading or you like to hold the positions overnight. You might find it suitable to trade after hours, that’s why you’ll need markets that are active 24/7. If you want to try different markets without risk, you can use a demo account.

Moreover, various assets behave differently. Also, the methods of analysis may differ greatly. For example, in stocks, you have dozens of specific formulas and most likely, you will be interested in watching the S&P 500 index. Meanwhile, in cryptocurrencies, that’s not the case. In crypto, traders are more attentive to market capitalization and Total Value Locked ratios or specific non-mathematical things like the activity of the community of a certain token.

Whatever is the individual trading path you need to remember that discipline and a cold head are much better than letting your emotions rule the game. If you try little by little, do not rush, and act strategically, you might find that trading indeed can be quite profitable.

Recommended News

Crypto trading has enticed Ananthi Reeta to write for CoinQuora. She consistently contributes news and feature articles. She has covered several different blockchain and crypto niches, especially altcoins.