Trading can be a tricky way to try to get rich quick
Learning the ropes first is cheaper than losing your cash
TRADING should never be seen as a get-rich scheme that requires just one online course and some money. Sure, there are people who have made a lot of money from it, but there are many more who have lost.
It’s important to distinguish between a trader and investor. A trader is someone who actively buys and sells shares on an exchange. Their main aim is to make shortterm profits.
This means they trade to make money either off intraday movements in the market, or a slightly longer timeframe.
Investors, on the other hand, buy and hold shares. They look for longterm value rather than short-term movements.
There are many types of trading. Before you begin, it’s important to decide what you’re going to trade and who with.
There are several products you can trade: equities, derivatives or foreign exchange. But some of these are highly complex mechanisms that will require a great deal of understanding and experience.
You also need to find a platform that works for you. Make sure that it’s a legitimate platform and that you are trading through a registered stockbroker.
Look at the ease of navigating the platform as well as the fee structure.
It’s also important that the service provider you go for is able to provide guidance and educational resources on the platform.
The fees are important because you’re charged a specific percentage of your trade. Some accounts also charge a monthly fee, so you need to be aware of these before you start trading. All of the major banks offer trading platforms. Quick tips:
Do not trade money you cannot afford to lose. Trading is risky and you can lose all your money. If you’re going to speak to people who trade for a living, ask them about the times they lost money. You’ll get a real idea of how quickly markets turn and bets you take can go wrong. The risk of losing all your money is ever present and should not be taken lightly;
Buy low, sell high. This is age-old wisdom that can never be ignored. It’s important to look at a stock’s history and see which direction it’s trading in. If it’s at its peak, you might be buying just before it drops, which will lead to a loss;
When choosing which stocks you want to trade, don’t go for popular stocks. They might be well known, but what they return might not be all that great;
Don’t overlook exchangetraded funds. ETFs are a great way to get exposure to a variety of companies or asset classes. But even with your ETFs, diversify across various indices;
Avoid trading if you don’t have the time or energy to do your research. It’s very important that you don’t underestimate the amount of knowledge needed to be a successful trader. An article or three here and there will not cut it. Buy books, attend seminars, watch online tutorials and ask questions. Ask your broker and ask experienced traders — don’t be shy. It’s cheaper than losing money; and
Have a plan. This would include how much money you are prepared to lose. If you know, then it might be a good idea to have a stop loss instruction on your trades. Stop losses are a way for you to stop a trade the moment it falls below a certain threshold. If you’re only prepared to lose 15% of the value you trade, you can place an instruction with your broker to sell at the point where your trade reaches that level.