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Your Route to Riches? What To Remember When You Start Trading

Millennial Magazine - start trading

For so many people, the concept of financial planning and preparing for the financial future means using what limited options are available to them based on their limited knowledge. The fact is that so many people have had to get another job to keep a roof over their heads, as well as, make massive sacrifices, especially right now. 

We can’t help but wonder why the rich are getting richer and the poor are getting poorer; is it to do with the fact that we’ve only got a limited number of options available to us, or do we need to learn more? This is why the concept of investing is so important because it appears to be such a vital commodity. But for anybody that’s brand new to trading and is looking at this as an amazing route to riches, it’s worth bearing in mind the following rules:

1. Have a Trading Plan and Stick to It

Regardless of whether you want to know how to trade in certain areas or not, the reality is that the biggest and most successful investors always have a solid trading plan. Before you start trading, write down a set of rules that will specify your entry and exit plans, as well as your money management criteria. 

The great thing is that in the modern day it’s easier than ever to test your idea before you start to risk real money. If you had an impulse to invest in a cryptocurrency like Ethereum, it’s easy enough to look at the current price of Ethereum, as well as its history. This is also where the concept of backtesting can be really useful. Backtesting allows you to apply your idea using historical data of a specific currency or investment idea, so you can see if it is viable. 

Once the plan is put in place and backtesting highlights solid results, you can then start to implement it into real trading scenarios. But you’ve got to remember that you need to stick to the plan. Deviating from your strategy can be detrimental.

Trading Is Not a “Hobby”

Many people make the mistake of thinking that trading is an amazing way to earn extra money to keep themselves afloat. The reality is that if you want to get involved in trading as a way to earn extra money, you’ve got to treat it as if it is a part-time business that you are supremely invested in. 

If you treat investing like it’s a hobby, where you dip in and out, you’re not going to learn anything. Trading is not a sure-fire way to get rich, and instead, if we look at it like it’s a business, we are going to approach it in a far more realistic way. Because trading involves investing expenses, with risk and uncertainty at almost every turn. This is why you need to research so you can maximize its potential.

Only Risk What You Can Afford To Lose

This is so important because if we all think that investing is just a way to get extra funds, we can start putting so much risk into the process that we could end up being worse off. Anybody that starts investing needs to understand that the money that they are trading with is expendable. If you are investing in things in the hope that they will pay off, you are only digging a deeper hole for yourself. 

For example, you shouldn’t use money that you had set aside for a down payment on a home. Losing money is difficult enough, and this is why you’ve got to remember that if you really want to start trading you need to save up enough money until you are able to put an adequate amount into your investment.

Keep Learning

It takes a lot of time to put the right amount of money into trading. You’ve got to remember that protecting your investment is crucial and if you are investing in something blindly, you are leaving everything to chance. The reality is that if you want to be a good trader, you’ve got to focus on your education and understand where your money is best put. This means keeping your ear to the ground, not just in terms of your current investment, but also in the facts and what the economy is going to do to the market. 

An excellent example right now is the war in Ukraine, which is pushing the cost of living up. Therefore, when you start to invest in an area directly affected by the current situation, you’re not going to get as much of a profit as you think. So you may believe that it’s worth pulling out in the meantime, but if you do, are you going to end up losing money? You’ve got to be a keen learner in order to face the future and be aware of the risks.

Trade on the Facts, Not Your Feelings

Following on from increasing your education, you’ve got to remember there are many resources out there that talk about an easy approach to trading. But the reality is that if you want to be truly versed in what trading can do for you, you need to dedicate time. You may think that it’s easy enough to use one of the main trading platforms to copy someone else’s trading strategy, however, this means again you are leaving things to chance. 

You need to develop an approach based on the facts, rather than if something feels good. But you also need to know when it’s time to stop. Because if you aren’t an effective trader or you have a poor plan, you need to stick to the facts and not be emotional. You’ve got to keep things in perspective, and when you are looking for easy ways to earn extra money, the reality is that trading and investing can pay off, but investing and trading are not easy practices. It may appear like it, but if you want to get started in this some of these tips can be invaluable.

What do you think?

Written by JD Hysen

JD Hysen is a fin-tech writer and music critic for Millennial Magazine. As host of The TrueMan Show, he covers all things related to stocks, tech and culture. He's a market analyst by day and a music scout by night, combing venues in search of fresh acts and noteworthy performances.

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