In fact, as a result of the 2008 global crisis, religiously following finance and business news is no longer a pastime limited to economists and City analysts. This increased focus on the banking and investment sectors has gone a long way to demystify the industry, making it more accessible to the ‘average’ person, opening the door to those who had never previously considered a career trading the markets.
As testimony to this, at Knowledge to Action we’ve seen a staggering 900% rise in people wanting to learn how to trade since the 2008 financial crash.
With this huge increase of budding traders, I’ve given Entrepreneur County my top five tips on ‘How to Trade’…
1. Don’t confuse trading with investing
Whilst trading and investing are often discussed alongside one another, it is important to recognise that they are discrete concepts, each requiring very different strategies.
The main distinction between the two is time. Investors hold their stock for a period of months or years, whereas traders jump in and out of trades very quickly – within, days, hours, and even minutes.
As a result of this, investors and traders look at different indicators to help them identify which markets to place their money in. Investors rely mostly on Fundamental Analysis – a method of creating financial forecasts by using historical and current data. Traders, on the other hand, typically use charts to identify short term patterns.
You can be both a successful trader and a successful investor, but never on the same position – if you start to interchange the two, you will lose money.
2. Maintain your composure
I have always maintained that you don’t have to be a City professional to become a successful trader; with the right motivation and commitment, anyone can learn how to trade. Having said that, certain types of people do take to the markets more naturally than others.
Trading floors are high pressured environments, where decisions have to be made instantly. Add to this the fact that the decisions you’re making will often concern large sums of money, and it is easy to see how the role can become a stressful one. In light of this, having the ability to maintain your composure and keep calm under pressure is vital for any budding trader.
Another key trait is discipline. No matter how good you become, there will always be someone out there who knows more than you. The best traders are those who are able to ask for and listen to the advice of others, whilst at the same time, learn from their own mistakes.
3. Have faith in yourself
Providing that you’ve researched your position before you’ve placed a trade, have the conviction to see it through.
If you’ve placed a long trade with the view of closing at the end of the week but the price starts to fall a couple of hours in, don’t let yourself panic and immediately shut the position down. The markets are always subject to fluctuations, and small negative movements can be expected, often being part of a larger cycle.
Unless something devastating and unexpected happens forcing you to cut your losses, have confidence in your predictions and don’t give up at the first sign of trouble.
4. Pride comes before a fall
Regardless of how much experience you’ve got, or how much money you’ve previously made, anyone is capable of making a bad call. A key part of being a successful trader is learning how to recognise a mistake and having the conviction to shut down a trade that’s losing.
Interestingly, although trading is viewed as a male dominated arena, women often make better traders than men, partly because of their ability to close down a losing trade before too much damage is done.
Men, on the other hand, tend to view winning and being right as a means to cement their masculinity, whereas having to cut their losses would be a sure sign of weakness. It is this male pride which makes it harder to admit defeat, causing them to back and even add to losing trades.
5. Knowledge is Power
With the endless jargon, confusing terms and complex stats that accompany the stock and currency markets, it is easy to see why new traders often feel overwhelmed.
Before you start trading, it’s important that you begin by familiarising yourself with the markets you’re looking to trade on, making sure that you have a working knowledge of their usual trends and cycles.
Obviously taking an introductory course like the ones offered at Knowledge to Action would be the ideal way to learn the basics, as you get a hands on experience of trading on real markets whilst being mentored by expert traders.
Whichever way you chose to start your trading career, remember that the most valuable commodity you can have is information.
A world renowned trader, Greg is a former Vice President of investment bank Mellon Financial Corporation, and founder and CEO of Europe’s top trader coaching company, Knowledge to Action www.knowledgetoaction.co.uk