When it comes to online trading you have to properly manage your budget. If done correctly, you can survive the ups and downs of the market. Here are a few tips on how to manage your budget. How to enter, stay and profit when online trading.
When it comes to personal finance, not many have proper money management skills, sadly enough. We gathered the most popular money management tip for trading.
Manage Risk – Always!
From beginners to advanced traders alike, this is probably the most important tip for anyone trading. You have to know how much should you allocate to any particular trade. On the high side, this limit is 2% of the total value of your trading account. It is also useful to use a trading calculator to estimate how much profit a particular trade can bring. Proper risk management is essential if you don’t want to loose your entire trading account balance.
Another useful tip is to use stop-losses. These add a layer of protection on your investments from any unpredictable market jumps – up or down! Setting your stop-loss to no more than 2% of your trading account balance should, generally speaking, keep you safe.
There are also other types of “stop-losses”: volatility stop, chart stop, equity stop or margin stops. Read about those and research them before trading.
Don’t let emotions take control
Trading on emotions is probably the #1 reasons most newcomers loose money in the markets. Don’t let emotions get in the way you trade. Greed, tilt and stress are your worst enemies when trading online. Moving stop-losses on open trades, early exits and leverage are all signs of bad emotion control.
Leverage – Treat It With Caution
While it may seem tempting to boost profits with leverage, there are two sides of this coin. The potential to boost your profits comes with a price. It also bring in increased risk and potential losses. Leverage might be something that experienced traders could ultimately do, but isn’t advisable for newcomers. Always research and take your time, before using leverage.
Take-Profit Levels – Set And Forget
Set take profit levels in advance to close your trades. Speed is the difference between profits and loss in trading. You should always set your profit level and know when to exit a trade at a profit.
We hope these tips have been helpful. Of course proper budget management is easier said than done. But if you follow the tips above, your trading career will be off to a good start!