The internet has provided thousands of people with an alternative way to receive a reliable income without ever stepping one foot into an office – something which appeals to many as a means to escape the 9 to 5. For those with a background in finance or investment, online stock and forex trading can be one of the best ways to create a substantial income – however, due to the level of risk involved, there is, understandably, some concern around its reliability. While success is not guaranteed, it’s very possible that if approached correctly profiting from trading can be made more reliable. The key is to develop your trading strategy. Let’s look at what can be done to better your chances of making a reliable income through trading.
Understand the basics
Every journey begins with a single step and it’s no different for trading online. The process begins with learning the very basics of the foreign exchange market (forex) and stock trading, including what factors influence the markets such as political and economical events and trends. In order to better your chances of being successful learning should never stop, and as your experience grows you should always be looking at ways to improve your strategies. This includes learning from your mistakes. It’s essential that you continuously keep informed of any current affairs that could have sway on the markets, in order to predict reliably. As well as this, stock and forex trading shows, magazines and websites can provide a stream of useful information that can help even a novice trader become a professional.
Compare and decide on a trading firm
The trading market online is not always the most regulated so finding a firm that you can trust is an important part of becoming a successful trader. You need to feel confident that your trading provider offers certain guarantees (such as the Financial Services Compensation Scheme) that will mean you’re at the least risk possible. Look for one that is approved by the Financial Conduct Authority or other recognizable regulation board, as well as offers you low starting rates and commission. Firms such as CMC Markets offer beginners free trials and demo accounts which will allow you to practise and develop a trading strategy before committing to trading live. Be sure to be clear on what their trading fees are before signing up so that there are no nasty surprises.
Formulate a strategy
One of the most common reasons behind why people lose money trading is by allowing their emotions rule them – becoming too emotional and making rash and ill informed decisions. You trading decisions must be assertive, but also rational and informed. If you’re someone prone to rash decisions then you might want to consider if trading is a good fit for you. Markets will always go up and down, and those who are able to hold out and remain level headed through rough patches and trade with the long term in mind often come out ahead and are able to achieve a degree of reliability. Before buying a stock, consider what price you would want to sell at such as 25% less than the initial buying price. By doing this, sudden shifts in the market will not cause rash decisions. Studying the history of the markets will help you even further, as it will enable you to better accurately predict the move of markets. A good book to provide further insight on this is The Intelligent Investor by Benjamin Graham.
You should always start small, and initially only surplus money (such as a small amount of savings) should be invested. This is money that can afford to be lost as new traders are finding their feet. Trading must be approached as an investment – you are inevitably going to lose money, but the hope is that as your experience grows so will you capability and confidence, allowing for more reliable results. Ideally you would have a small cushion of savings to enable you to both make the initial trades, as well as act as an insurance should you make a loss. Start off slowly with smaller amounts until you’re more experience to be able to make educated decisions and more substantial buys with relative confidence.
Run your trading like a business
A business cannot rely on just one sale, and it should be the same when you trade online. Similarly, a business is not concerned about losing one small sale but rather looks to performance over a longer period. Long-term business plans just like long-term buying and selling strategies can be very similar. Additionally, a successful business does not put all of their eggs into one basket just like a successful trader would not rely on just one trade. For the most chance of success and reliability, you must look at diversifying your trades. This will mean that should one market suffer, you will have the opportunity to recuperate elsewhere. Over the long term, this will mean that you’re far more resilient to loss.
Consider a professional stock trader
A stock trader who has years of experience handling client’s stocks and you still be unsure, can be an ideal solution when starting out in the trading world. Hiring a professional stock trader (although requiring an initial investment) can allow you to learn independently while feeling secure that you have a professional on board. By hiring a stock trader to trade on your behalf, you can transition slowly from working a normal nine to five job to a full-time trader.
As we’ve looked at, success in trading is not guaranteed, and if the guarantee of a monthly salary is something you need then it may well be worth considering if trading is the right profession for you. However, with the right strategy it can be far more reliable. Ensure that you spend adequate time understanding the markets and the risks involved, and once you feel ready to start trading live start small and never bet more than you can afford to lose. If you are still in doubt, consider contacting an independent financial advisor who will be able to access your financial situation and advise on whether trading is right for you.
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