6 Important Tips for Trading the Financial Markets

Posted on Feb 24, 2015 in Blog

Trading the financial markets can be a highly exhilarating experience; the rapid rise and fall in value of stocks has seen fortunes both gained and lost over the years, and will doubtless see the same in the future. In today’s globalised environment, traders have access to a wider range of trading opportunities than ever before; but that high level of accessibility comes with some potential pitfalls which it’s wise to be aware of.

1. If you’re looking for quick and easy profits, look elsewhere

If trading were that simple, everyone would be doing it. There are many get-rich-quick sites out there which claim to have found guaranteed ways to make a profit from the markets, but as a general rule, if it sounds too good to be true, it probably is. No traders are right 100% of the time (even Warren Buffet makes some bad calls). It’s certainly possible to make a profit from trading, but one can also end up with significant losses if one isn’t careful.

2. Research Before Trading

It’s definitely possible to make a profit from spur-of-the-moment trading. However, if you don’t really know what you’re doing, it can be easy to make mistakes, which can lead to decidedly negative results. Most people would take care to explore the different aspects of a product or company before making a direct investment in it. Why would online trading be any different?

3. Set Reasonable Targets and Know When to Call Time

It’s human nature to hope that things will turn around, but such optimism can be a dangerous when it comes to trading – you may sometimes find that staying with a trade takes you from a bad position to an even worse one. Likewise, while ‘I can do even better’ is a popular sentiment, keeping a trade open in the hope that your position becomes even more profitable can be risky; if the market turns the other way, you may find yourself left with a loss when you could have taken profit. By deciding on a clear exit point before you enter a trade, you may be able to limit your losses in some trades whilst not missing out on profit in others.

4. Keep Calm and Focussed

As in many areas of life, when one is upset, tired or angry it’s much harder to think in a rational manner and make logical decisions. Whatever the reason for your mood, it’s a good idea to think twice before trading in such a condition – if you’re not feeling at your best, you may find yourself making mistakes, and trading mistakes can prove costly.

5. Be Aware of Upcoming Data Releases

If you know where to look, there are plenty of pre-planned financial announcements which have the potential to move the markets. However, it’s not clear until after the announcement as to which way the market will move. Nonetheless, being aware of the possibility of volatility in the wake of such announcements can help you plan ahead and possibly take advantage of subsequent movements.

The world’s largest economies make announcements regarding macroeconomic data on a monthly or quarterly basis, whilst all publicly traded companies release their most recent results at the end of every quarter. Some trading brokerages provide their customers with information on upcoming releases, but there are free macroeconomic and earnings calendars online for traders who want to take a look for themselves.

6) Choose Your Broker Carefully

 In the wake of the disturbances caused by the Swiss National Bank’s surprise scrapping of its currency cap, the prudence of using a tried and tested brokerage is clearer than ever. Based in the City of London and regulated by the UK Financial Conduct Authority, ETX Capital has over a decade of brokerage experience. Click here to find out more.