Rules to Stick By For Online Traders

Rules to Stick By For Online Traders

If you are going to start trading as a day job with an online broker such as CMC Markets, you really need to set some rules aside and stick to them. Having rules can essentially create a positive movement in your profits and give you the confidence, stability and security you need to trade away! Here are some rules that are vital to trading – ones you should stick to if you want to be a success in the world of online trading.

Follow the Three E’s – Enter, Exit and Escape

The basic rule of them all is exactly that. You need an entry price, an exit price and an escape price incase the worst happens and your trade goes down the toilet. Basically before you rapidly press the enter key you need to know when to get, when to get out and what you should do in case disaster strikes. If you want to minimize your losses then having an escape price which is also known as a stop price among many traders can essentially save you from a huge loss.

When the market opens – Don’t trade for the first fifteen minutes

In all honesty the first fifteen minutes when the market opens is the rush traders and when the panic trades take place. All beginners should avoid this time during the market if they are looking for reversals. Wait a while and see what happens if you are looking to make profits happen.

Use limit orders rather than Market Orders

There is a huge difference between market orders and limit orders. Market orders are designed so that your broker buys and sells at the best price. Even though this is good, this isn’t great. Using market orders doesn’t mean you will make any profits. Saying this, by using limit orders you as the trader can control the minimum and maximum price that you want to buy and sell at. Limit orders are highly recommended over market orders for this reason alone.

If you are a beginner avoid using margins

Margins are basically the same as borrowing money from the bank to invest in something. The only difference is that you are basically borrowing from your broker. The simplified way of putting it is that if a trade goes against you then you could lose a lot more money than you expected and essentially have your account closed down. When margin is used in the correct manner it can in effect increase your profits but to do this it takes a huge understanding of the market itself and the methods surrounding the trades which are being made. The bottom line is – if you are a trader in the beginning stages then avoid using margins like the plague until you get your head around trading!

Have a plan on how, what and when to sell

One of the biggest mistakes many traders make is the fact that they research the market, the economy, the stocks and the assets on the basis on what is good to buy. What a lot of traders forget to do is research on when, how and why they should sell it. Create a plan which involves knowing when to exit to increase your profits. This is an important part of trading and just as important, if not more than the trading strategy you are using.

Keep a strict journal

Trading is a job and to do that job right you need to know everything possible. Make a journal of every single trade you make however big or small. Every loss and every profit made needs to be noted. Keep a note of what stocks you were looking at, why you didn’t trade and what the outcome was. To be able to understand yourself as a trader this is vital. If you want to become successful then you need to understand the trading process which you are forming, creating and practicing to be able to improve.

Keep a note of the research you do, any news or reports that are important. Trading can make or break a person and you need to be clear-headed, logical and sensible in all your choices.

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