Short term trading is an attractive way to make money. In fact, the best traders will outperform the major indices of their market year after year. This doesn’t mean that all traders will, though. The issue is that the majority of traders lose money and they lose it very quickly. You don’t need to have this happen to you. By being aware of the mistakes that these poor traders are making, you can capitalize on their mistakes and become one of the highly profitable pros that are beating not only inflation, but the general pace that top investors are creating for themselves. While you could expect to make a rough 3% year after year if you put your cash into the stock market and just left it there, as a top level trader, you could make 10% or more each year–more than 3 times as much as investors make. You just need to know what to do and what to look out for.
What to Look Out For
Many people don’t realize the totality of the risk they are taking on when they begin trading. This is true of any marketplace, whether it be stocks, Forex, commodities, or binary options.
First, know your risk. Risk is inevitable whenever money is involved, but it can also be managed effectively with the right precautions. Always trade with a manageable amount of money, something that you wouldn’t cry over if you lost it all. Also, when applicable, use conservative stop-loss points in order to ensure that your trades never get out of hand. In some cases, this won’t be possible, such as with binary options, but even with these, some brokers will allow you to end trades early for only a partial loss.
Before we continue to the next step we want to emphasize the word education. If you are not well aware of your surroundings when trading, you will fall off real quick. Binary Trading sites like binaryoptionsu.com will help guide you through the learning process. We want to help you succeed for sure. Remember, when it comes to picking a trade, make sure you have really good knowledge first.
For our next section, manage your open trades well. There’s a lot more to trading than just scouting out new trades. You need to be able to multitask your existing open trades with all your potential trades. There will come a point where it is tough to do any more, so don’t go past this point. If you do, the quality of what you are doing will begin to suffer. And when this happens, you are losing money that you shouldn’t be, or, best case scenario, minimizing your profit potential.
Third, don’t obsess about finding the perfect method. It doesn’t exist. Some trading strategies are far better than others, but the only way to figure this out is by knowing what your strengths and weaknesses are, how much risk you can safely tolerate (emotionally and financially), and what level of experience you are currently at. The more you practice, the better you will get at this. This doesn’t mean that you shouldn’t be trying to figure out how to improve your trading; you should be doing this constantly. But there’s no silver bullet that will fix everything, so don’t spend time trying to find it.
What to Do
You should spend your time doing certain things, and after a while, you will see that some of them work better than others. If you track these things, and are able to learn from your past mistakes and triumphs, you will eventually weed out the practices that are not as beneficial to you as others. This will create a process by which you can keep improving your profits as a trader. Here are a few traits that the best short term traders have on their side.
One thing that the best do is track their trades. This allows them to see precisely where they are making money, and where they are losing it. A trading journal doesn’t need to be a leather bound notebook that reveals your deepest darkest trading secrets, but it should keep tabs on which trades you are making, when, your reasoning for them, and your emotional state. Sites like http://trading-journal-spreadsheet.com/ will give you a nice spreadsheet to track all of your trades. All of these things are important because they reveal the hard facts and the potential for human error. You can learn from both.
Next, practice. You can demo trade with a binary options broker or a Forex broker, or you can just paper trade on your own. Either way, you need to find a risk free way to improve your skills. Trading has a learning curve, and until you get to a certain point–unless you are very lucky–you will lose money. Going in as prepared as possible is the best way to offset this loss.
Also, experiment. There’s no one right way of trading, and there’s no one right type of broker you should use. For some, binary options are best, but for others, using a traditional stockbroker is. You might have an idea of what’s best for you already, but experimentation done in a safe and risk averse method is only going to help.