5 Tips for Trading Shares

Succeeding as a stock trader is about more than just working hard. It’s about doing the right things, and that means knowing what you’re doing and putting that knowledge into practice. In fact, too many traders start out full of enthusiasm and energy, but quickly become disillusioned because they make avoidable mistakes.

Here are five possible ways to increase your chances of becoming a successful stock trader.

Choose a trading style that matches your personality

We all have different personalities. Some of us like to be slow and methodical, where others enjoy constant action. Some of us are risk takers, whereas others want to make sure they have all the angles covered before they get into something. Trading offers something for all of these personalities, but if you choose the wrong trading style, you’ll end up being frustrated and make mistakes. For example, if you do like constant action and get impatient when things aren’t moving, then day trading may be for you. However, if you like to take a more measured pace and find yourself under pressure when things move too quickly, then you may want to trade on weekly or monthly horizons.

Pick a broker that suits your trading style

Once you have decided which trading style is right for you, it’s important to pick the right broker. For example, if you’re getting into day trading, then you’ll want a broker that will give you direct high-speed access to the markets. On the other hand, if you’re a weekly or monthly trader, then a discount broker may be better since you’ll pay far less money and still get the services you need.

Understand your edge

To be a successful stock trader, you need to have an edge – something that gives you an advantage in the market. Take the time to ask yourself what factors give you an advantage – and then make sure you focus on these. For example you may have insight into a particular country’s economy and therefore the performance of their currency. Or you may be informed on a particular commodity. If you don’t know your edge, then it’s likely you don’t have one at all.

Educate yourself

One of the biggest mistakes that novices make is to assume that they already know everything about the market – they don’t. Take the time to get a good education before you start risking large amounts of money. And, once you do start trading, make education an ongoing process. You may want to take advanced courses, or spend time studying other successful stock traders.

Manage your risk

Any time you trade a stock, you’re taking a risk. However, you should never be taking unknown or excessive risks. Understand up front how much you are willing to lose in any given trade, and how much you can reasonably expect to win. Pick trades that maximize your reward to risk ratio, and make sure that you actively control your risks – for example, you may place stop losses appropriately in line with market conditions. Also, decide on when you will exit a trade before you ever make it – there’s no use making a paper profit and then losing it because you left your position open too long.

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This article is a guest blog written by easy-forex