On the surface, you wouldn’t think there would be too much to trading shares: you only have to buy and sell; what more could there be?
As anyone will tell you, there is a lot more to it than you initially think. This might be the first tip to getting started in trading equities.
Here are five rules to consider:
1. Be well prepared
Most traders will agree that to be successful in the markets you need to develop a trading approach that is right for you and suits your personality.
First, I would suggest conducting a self-assessment to determine the following:
- Your own goals and objectives in entering the market.
- Your own personal strengths and weaknesses.
- Your tolerance of risk.
- Your patience.
- The amount of time you are prepared and can afford to commit to trading.
- Your level of self-confidence.
- Your discipline.
Questions regarding your money management include:
- What is your trading capital?
- What is your risk amount?
- How will you determine your position size?
- What is the maximum amount of your trading capital you are prepared to commit to a single trade?
- What will be your maximum risk exposure at any one time?
- How will you determine your initial stop-loss level?
- How will you determine your trailing exit level or profit target?
- After losing what percentage of your capital will you cease trading?
Questions regarding your entry decisions are:
- What financial products will you trade on what market?
- Over what timeframe will you trade and how will you identify trends?
- Will sector analysis play a part in your trading decisions?
- What conditions will you use to determine a trade entry?
- Will you trade “at market” or “at limit”?