7 Top Tips for Trading Online

If you’re new to trading, you might be feeling a bit overwhelmed. There’s a lot to learn about trading, and much terminology to learn and understand.  Sometimes, information can even seem conflicting, leading to an overall sense of confusion. Where do you start to educate yourself about trading online? What are the first steps that you should be taking to trade?

We get it. To help, we’ve developed a list of the top seven tips for beginners. This list will help you begin to learn how to trade online.

Tip 1:  Protect Your Money

Though it may sound obvious, protecting your money while you trade is often overlooked or misunderstood by those new to trading. The best way to protect yourself is to understand that trading involves a level of risk to gain your reward. To trade effectively, you’ll need to effectively manage your risk.  One way to do that is by limiting your exposure to unprofitable situations.

Whether you have $10 or $10,000,000, protecting your money is critical to online trading success.

When learning to trade online, it’s important to be realistic. Trading is not a tool to get rich quickly – but it can be a tool to get rich over time. It is unrealistic as a beginner to believe that you can enter the markets, make a large amount of money, and then exit swiftly in a few days. This is not a realistic goal for new traders. Instead, focus on preserving your capital as you invest and learn. Stick to the basics until you’ve really learned the ropes.

It’s safer to take risks when you have more experience – so save more aggressive trading strategies until you’re both more confident and more experienced. 

The goal in the short run is to continue trading. You won’t be able to do that if you run out of funds to trade with. Learn to minimize your losses first through effective risk management, including a stop loss. This is the key to all successful traders. Then you can learn to maximize your gains.

Tip 2: Set Realistic Trading Goals

Setting realistic goals will keep you focused and disciplined. It will also help you decide what you’re looking to achieve and when. Having a goal will also help you measure whether you’ve been successful or not.

The key is being realistic. If you’d like to see an ROI of 20% in your first year, that may well be achievable. However, earning a six-figure income in three months is probably not. When setting goals, use the SMART model: your goal should be specific, measurable, attainable, reasonable, and timely.

Your first goal when learning to trade online should be to protect your money. Surviving is the most important element of success when trading online. Determine how much you have, how much you’re willing to invest, and what your likely returns will be. Then, focus on the goals you’ve set and re-evaluate them when needed. 

Tip 3: Keep a Trading Journal

While it may sound strange at first, it’s a good idea to keep track of the trades you make in a spreadsheet or journal.  List the market instrument, the price, why you chose that trade, and whether you earned money on it or not. By reviewing these trading logs, you’ll be able to understand why you made the decision you did, and determine if you did in fact follow your trading strategy. You can review your thought patterns for error as well as see when you were correct in your predictions. These logs can also highlight recurring patterns – whether positive or negative.

Hindsight, as they say, is 20/20. More than that, hindsight is one of the most powerful educators in existence. Having a detailed document to review will let you accelerate your learning by identifying patterns. Analyse what worked and what didn’t work and learn from both your winners and losses.

The following is a list of the key facts you should keep in your trading journal:

  • The market instrument, whether it was a long or short position, and the position size
  • If you added to the position, and why
  • Date and time you executed this trade 
  • Entry and exit price
  • Stop loss price
  • What your profit or loss is/was
  • Why you entered this trade and trading strategy, including exit strategy
  • Why you exited the trade
  • Did you follow your strategy

This data will allow you to calculate and track your key trading data:

  • Win  loss ratio (how often you pick a winning trade) 
  • Edge Ratio (ratio of total win value to total loss value)

 

Tip 4: Have a Trading Plan

A trading plan is the most important part of your trading – so much so that we’ve created an article that helps you develop your own. Your trading plan should be tailored specifically to you; your trading style, your trading goals and your current level of trading knowledge and experience.  A trading plan will:

  • Keep you disciplined as you learn to trade online
  • Outline exactly what you want to trade
  • Give you confidence in your trading decisions

Your trading plan will ensure you know what you will do for any trading scenario, so your actions will be based on a well thought out plan, and not a reaction made in the heat of the market action.

Your trading plan should encompass every aspect of your trading ventures, including:

  • Entry strategies
  • Exit strategies
  • Risk and money management
  • Resources

Tip 5: Remain Disciplined

Trading success may begin with a plan, but it certainly doesn’t end with one. Trading is something you must learn from every day in order to be successful over the long term. 

By following the tips above, you’re already a step ahead of everyone else that is looking to learn how to trade online.  The most important thing from here on out is to stick to your plan and apply what you’ve learned. If you don’t, your goals will likely never come to fruition.

Trust in yourself and the plan you’ve put together.

Tip 6: Be Patient

Unfortunately, being successful in trading can sometimes take time. You might make great returns in a single trade over a month, and then immediately lose it in a week. 

This is why patience is so important when it comes to trading online successfully. It is important to accept in trading that sometimes you will win, and sometimes you will lose.  Do not expect to always pick a winning trade every time you enter the market.  Even the most experienced traders never achieve this. The key is to win more often than you lose and ensure that your winning trades are bigger in value than your losing trades.   If you get this right, then you will make profits from trading.

Tip 7: Keep a Positive Mindset

Keeping your thoughts positive will help you stay passionate about trading, and that passion will help you keep improving. Keeping positive, though, is easier said than done when markets are volatile or you are losing money.

Try not to let small losses impact your confidence. If you stick to your plan, everything should work out fine in the end. Small losses are a part of process and simply the cost of doing business when it comes to trading.

Trading Online: The Bottom Line

Initially, trading online can be an overwhelming and even daunting experience when you are new to the markets. However, with the right approach and a willingness to learn, the rewards from trading can be significant.

By following the tips above you’ll be better prepared than ever to start your trading career.