By J Eagle
When I started financial spread trading in the 1990’s I pretty much dived in head first! I’d read the books, attended seminars and courses and just wanted to get on with earning some money. With hindsight, I wish I’d been more patient. It would have saved me a great deal of heartache, not to mention the money. Here a few of my own tips
that I wish I had adhered to all those years ago.
When I started financial spread trading in the 1990’s I pretty much dived in head first! I’d read the books, attended seminars and courses and just wanted to get on with earning some money. With hindsight, I wish I’d been more patient. It would have saved me a great deal of heartache, not to mention the money. Here a few of my own tips
that I wish I had adhered to all those years ago.
Try Paper Trading – As I’ve said, I couldn’t wait to start my financial spread trading career and get on the phone to place my trades (back then you could not place trades on the various companies internet platforms like you can today). I wish I had placed a few ‘make believe’ trades i.e. paper trading. Iwould have then got a better understanding of the markets before risking my hard earned cash. Today, it’s even easier to paper trade as many companies allow you to open a demo account with ‘make believe’ money.
Start Small – When you have gained some confidence from trading on paper, start financial spread trading small amounts. Most companies will allow you to place trades for as little as £1/€1/$1 point (some even less than that). It does not matter if you only make a small amount, the important factor is that you will be gaining experience and learning to read the markets correctly.
Don’t Bet The Rent Money - As harsh as this may sound, you really should only be trading money you can afford to lose. If you are using with money that you need for other things you are certain to fail. You simply will not be able to make sound decisions if you are trading with money you are terrified of losing.
Cut Your Losses Short - Nobody likes to admit they are wrong! This fact makes cutting your loses one of the most difficult things to do – it takes a huge amount of discipline. But unless you learn this golden rule you are not going to survive in the world of financial spread trading. New traders, in particular, often find admitting that they are wrong an almost impossible task and simply refuse to close losing trades leading to even greater loses. Cutting your loses short is an essential part of your money management. Even if you are correct on less than half of your trades, as long as you cut your loses short and let your profits run, you can still make money. Having three or four winning trades out of ten can make you a winner if you keep your discipline.
Let Your Profits Run - It is important to let a profitable position run and not to close your trade too early. Sometimes it may be tempting to close a position just for the sake of taking a profit. Resist this urge. Ask yourself why you want to close the trade? You may be throwing away even more profit by closing your trade too soon.
Don’t Get In The Way Of Trends (Trains) - When a market is moving in a major trend, think of it as a speeding train – and don’t get in the way. If you do, you are likely to get hurt. A mistake often made by those new to financial spread trading is to buy or be long in a down trend or sell short in an up trend.