Trading without a plan
The vast majority of beginner traders start trading in the stock market without a plan. Regardless of whether you want to make money on the exchange regularly or prefer a passive source of income, creating a trading plan plays an important role. Otherwise, investment and speculation turn into a losing gamble.
The only exception to not having a plan is to use a ready-made portfolio or the services of a financial advisor. In this case, you follow the developed investment strategy, so making mistakes will be minimal. However, to become self-reliant in the stock market, the first thing you need is a trading plan. In it, the trader fixes the following key points:
1) preferred trading style: scalping, intraday trading (intraday trading), swing trading (position can be held for several days) or long-term investing;
2) analysis method: technical or fundamental;
3) choice of trading platforms:
– Russian or foreign securities market;
– stock market, derivatives or currency market;
4) risk management (risk management): determination of the maximum risk per trade, the allowable drawdown on the deposit per month, the ratio of profit to risk for one position;
5) rules for entering a deal and other aspects.
Following a trading plan allows you to make transactions systematically and deliberately. Over time, skills will improve, increasing the efficiency of trading. You will learn to understand whether you made a mistake or the market simply behaved differently than in most cases.
The mistake of beginners is also the opening of a “random” (reckless) transaction. Any purchase or sale of securities should be made after analyzing the situation in accordance with the trading plan. Before the deal, a forecast is made that answers the questions:
– Why can the price test this or that level with a higher probability? Factors for and against.
– At what prices to fix profits or losses and why?
Even a novice trader needs to understand why the chances of a successful trade are “on his side”.
Trading without preparation
Before you start trading with real money, analyze a certain number of charts. Observe price action using technical indicators and identifying support and resistance levels. Try to find different patterns (shapes, price action or other patterns) on charts with different timeframes. Understanding technical analysis is useful not only for speculators, but also for investors, for whom it is equally important to open and close a deal at better prices.
If your trading style is swing trading, you also need to understand the impact of news on price. With medium-term and long-term investment, fundamental analysis of the company and industry analysis are “connected”. At the same time, understanding what is happening in the world markets as a whole will not harm any trader. Unless such information will be completely useless for a scalper.
After you see the first positive results of your forecasts, you can think about opening a real account. There is another option: first try your hand at a demo account.