Make Money Online Share Trading Tips From Riccardo
Smart Tips to Make Money Online Share Trading
As mentioned in previous posts, my youngest son has learnt how to make money online share trading, and having a trading account, is also a smart way to have some funds tucked away safely offshore. Read this sensible way of trading which minimizes your risk, and increases your profits. This is an especially good method to implement while you are still new at online share trading…
Trading the markets can be tricky and the only way to master them is through experience, research, money management and set goals or plans. Most new traders do not know where to begin and are often too eager to start making money before taking the risks into account. No one wants to lose money when investing and whilst there are safe ways to invest your money, they might not be as active as trading the markets and can take years to show a decent return.
It can be quite disheartening losing a whole lot of savings on something that has the promise of giving you the control over becoming wealthy and making great amounts of money, this is usually the case with most new traders who see online adverts claiming that they can turn a tiny investment into thousands in just a month!
Patience and a solid strategy are vital to being a successful trader that wants to make money online share trading and whilst it might take some years to achieve, others will be able to be profitable much sooner. It is important to remember that when one trades the financial markets it is done through a broker which allows an individual to trade larger quantities through the use of leverage, and while leverage can be very useful, it is also the downfall of many traders this is why it is often referred to as a ‘double-edged sword’ so make sure you are aware of the leverage your chosen broker offers and how to use it correctly.
A simple rule to follow when starting out is to never risk more than 2% of your total account size on a single trade and when this rule is combined with a basic money management rule like a 2:1 profit-loss ratio, the road to success becomes a lot clearer.
There is a common misconception that trading financial markets is similar to gambling, this is however untrue because the odds of gambling can be infinite whilst trading is simply 50/50, so every time you make a decision it can only go one of two ways. To be successful the odds simply need to be 60/40 in order to make money for example a new trader makes ten trades based on careful analysis, for each trade he risks $1 for a possible $2 profit in this case his risk/reward ratio would be 2:1, if he loses 4 out of 10 trades he loses $4 but the other 6 trades result in a $12 profit which means he has made $8 after taking the losses into account.
The following table illustrates this simple methodology which if used will generate a profit even in a case where the trader loses half of the trades or more.
This is a great foundation for anyone who wants to start their trading career but has no idea where to begin;
Initial deposit: $100
Amount risked per trade = 2% for a possible gain of 4% (2:1 risk reward)
|Trade No.||Amount risked (stop loss)||Possible gain (take profit)||Type of trade||Outcome|
Totals: $20 $40
Profit = T/P ($4*5) – S/L($2*5) = ($20) – ($10) = $10
In the end the trader has ended up with a decent profit and by sticking to this approach can be successful even if he/she only achieves a 40% win rate. This shows the effectiveness and importance of money management, which when combined with correct risk/reward ratios are a traders most powerful tools to protect capital and slowly increase profitability.
It is however unfortunately possible that a trader can lose all ten trades or more in a row, that is why it is vital to do your research and stay up to date with events concerning your chosen investment channels and also to perform other forms of analysis such as technical analysis. Every bit of knowledge that is gained and research done gives you an edge over the markets when you want to make money online share trading, and in the end will allow you to make decisions resulting in a 51% win rate over a 49% loss rate which in the long run leads to profitability.
Note: trading comes with a risk and this post in no way constitutes financial advice, and applying this system is done at your own risk.