Online trading

7 tips to excel in online trading

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What does it take to be good at online trading and earn money by buying and selling stocks, currencies, cryptocurrencies and other financial markets on the Internet?

1. Online Trading vs Investing

Online trading is an active, short-term method of making money. It differs from the long-term investment approach advocated by Warren Buffett. It is closer to the way the famous ‘Market Wizard’ Paul Tudor Jones plays the market. Online trading offers an amazing opportunity to earn a freelance income using the internet, BUT it’s not for everyone. Before investing your money and time in online trading, it is worth checking first if it is right for you.

Related: What You Need to Know Before Getting Started in Online Trading

2. Find a good online trading app

Online trading can be done using your smartphone, tablet or desktop computer. It is important to find trading companies that offer an online trading platform that can be used on any of these devices. The broker or online bank must be regulated by a government agency of a reputable country such as FINMA in Switzerland or the FCA in the UK. Among the best online trading apps, the cost of trading is generally comparable, but you need to make sure that commissions and bid/ask spreads are acceptable.

3. Take a free online trading course

There are many free online trading courses available on the internet, as well as paid options. No course teaches you everything you need to know about online trading – most of those lessons come from experience. Learning concepts like lot size, pips, leverage and placing an order in trading won’t take long but is necessary to understand how online trading works. Ideally, choose a trading course that explains the different trading styles and trading strategies available.

Related: How to start investing

4. Choose a trading style

Broadly speaking, you can be a day trader doing day trading, a swing trader doing swing trading, or a position trader doing position trading. You can break this down into strategies like scalping. A scalper aims for very fast entry and exit trades to make a profit or loss in the short term. The time you can allocate to trading will play an important role in the trading style you choose. If you have a few hours a day, you can day trade; a few hours a week would be more suitable for swing or position trading styles.

5. Learn a trading strategy with risk management

There is no need to reinvent the wheel. Find a reputable trading mentor or trading educator who explains some simple trading strategies. Over time, you will modify the strategy to suit your own personality. Something important to do from the start is to build in risk management, which in simple terms is making sure you don’t risk too much on a trade. A simple buy and sell strategy on forex signals is easy to learn, but there is no way to manage the size of winning and losing trades. Harmonic trading is an example of an advanced trading strategy that incorporates trading risk management.

Related: How to Diversify Investments: 4 Simple Tips to Get You Started

6. Use a trading plan to set goals

All the best traders use a trading journal and make a trading plan. This plan can be adopted from already written trading plan templates. It will give details such as the number of trades to be made per day, the amount of money you will deposit in your trading account, your financial goal for the end of the year, etc. There is also the decision in the financial markets to choose, for example, naked call options on technology stocks. Keeping this trading plan handy will help encourage consistency in your trading.

7. Be persistent, keep your trading discipline

It is this last point that separates consistently profitable traders from others. Conditions in the financial markets will vary, which means your online trading results will also vary. It is important not to change trading strategy too quickly. Try to learn from your experience and use your trading journal to do more of what created winning trades and less of what led to losing trades. Whatever it takes to maintain your discipline, including good R&R, is worth it.