Tips on How to Avoid Losing Money When Trading Indices
With the stock trading market gaining more popularity among retail traders and investors & beginners need to learn how to correctly setup their trading investment activity so as to avoid losing money when trading Indices.
The following tips should guide beginners on what to do before starting to trade online and before they invest their money in the stock trading market.
Take Time to Learn Before Investing in Indices
The first thing that every trader should do is to take time & learn about the online stock market before they decide to invest their funds in this market. For examples, on this website there a total of 100 learn lessons that traders should learn so that to understand grasp all the basic concepts as well as advanced concepts that will explain to them what indices trading is all about & the various strategies used to trade as well as topics that explain to traders how to manage their account balance. Trader also learn about stock leverage, margin & how these 2 are used in trading & how leverage can increase trading profits as well losses and also what margin is & how this margin is calculated & why traders need to maintain enough capital in their trading account when trading on margin using leverage provided by their stock trading broker.
After learning all the trading tutorials, traders should come up with a plan that will set the rules that they will follow when trading indices. This plan will summarize all what they have learnt & will be used as the guide that one will use when trading the online stock market.
Practice Indices on a Demo Practice Account
Next thing that a trader should do before they invest their money in the online stock market is to practice what they have learned & test their plan on demo practice account. The practice practice stock account is where one can learn how to place trades and trade the stock market but only that they will be trading on a practice trading account with virtual funds.
The demo stock account is similar to real account & trading environment is same as when a trader is trading the real market using real money, only difference is that the money being traded with on a demo stock account is virtual money and there is no risk of losing money when trading on a practice stock trading account.
The softwares of most brokers will provide option of opening a practice stock trading account, a trader can use this demo stock account to learn about the trading platform. The trader will also use this demo stock account to learn how to trade using different orders types provided & learn how to close trade transactions.
The trader can also test any strategy or any automated Expert Advisors before they decide if their strategy is profitable enough to start trading with it in trading market.
Use a Plan & Stick to the Indices Plan
Traders should always use the trading plan they develop to trade the online market. The strategy that a trader chooses should be well written in this plan & trader should always follow the rules of this plan when deciding when to open & close trades.
If as a trader your chosen strategy is to use automated strategies & Expert Advisors then these automated strategy should be specified in your trading plan. Whatever system you decide to use as a trader, write it down in your plan & stick to trading with that strategy.
Traders should also avoid emotions of fear and greed when trading in trading market. The plan will help trader plan their trades & this way traders will not make trades based on their emotions. A plan will help a trader set clear goals when trading & at same time will help traders to stay organized when trading and thus ensuring the traders become more successful when trading in the stock trading market.
Keep a Journal To Track Your Results
As a trader always keep a journal & writedown all trades which you open in this journal, write-down why you opened each trade, when you closed the trade and also the amount of profit or loss generated from that trade.
After a while you can then review the trades you've made try & look at why the losing trades made a loss and why the winning trades were successful & after which you can then try and do more of what makes you successful & less of what's making you to open losing trades and that way keep on improving on your trading strategy.
As a trader if you don't keep a journal you might continue making same mistakes over and over again without even knowing it, but if you keep a journal & you keep reviewing this journal time to time then you will be give yourself a chance to identify mistakes you make in trading from reviewing this journal.
Choose a Reputable Broker Before Open your Account
Before you open a trading account with any broker do some research and find a reliable stock trading broker which you can do biz with.
Choosing a good broker will give you a chance at making profits from your online trading activity. Choosing a online broker that is regulated is the best advice that you can get. Regulated brokers follow regulation rules set by their regulators & this means that these brokers are the best to choose when opening an account as these brokers are the most reliable because they are regulated which also means that they are legitimate.
Open Account When You Have Enough Capital To trade With
Trade just like any other business requires that traders open a trading account when they have a good enough amount of capital to trade with.
Indices requires that a trader starts trading with at-least $1,000 if they will be trading micro lots & a minimum account balance of $100,000 if they will be trading standard lots. If as a trader you don't have the required capital it is best to save until the time you will reach the amount of money that will help you to open a well capitalized account. This will increase your odds of success when it comes to trading indices in the stock trading market.
Use Proper Money Management Tutorials To Protect Your Account
As a trader you'll need to protect you trade account balance when trading if you want to trade profitably for a long time. The best way to protect your trading account is to learn about the proper money management rules & follow these rules when trading the stock trading market.
Indices money management rules will ensure that you'll protect the money in your stock account & that you will have a chance of trading successful. To be profitable & trading successfully in long run a trader has to implement proper money management rules when trading. Indices money management rules that a trader will follow should be specified within their plan.
Indices money management rules will help a trader to minimize their trading losses & essentially help indices trader learn how to protect the profits that they make in the stock trading market using different methods specified by the trading equity management rules. Traders can learn about funds management from the learn tutorials section of this web site.
Indices money management will also help trader know what amount of stock leverage is best to use when opening trades. Trading Leverage gives trader a good opportunity to earn profits from this borrowed capital. Trade is very popular because of the fact that traders using leverage can use little of their investment capital & borrow the rest of the money to make a trade. By using money management rules traders will learn how to use stock leverage & know the best leverage to use when trading based on the account balance they have in their trading account.
Because leverage increases both the profits as well as losses, traders must come up with rules on how best to use this leverage when trading. By learning equity management rules used in traders will know how to decide what amount is best to use when indices trading using their trading strategy.
Summary
Traders should try & use the above approach so as to avoid losing money when trading indices. Following the above strategies trader can improve their chance of being more successful & profitable when trading the stock trading market.
