August 31, 2023

What You Should Do Before Making Your First Trade?

Since the internet became widespread, many people have used the information superhighway to invest and trade. This transformative technology enabled the public to do what was previously the exclusive domain of just a few institutions.

Fast forward a few decades, and things have transformed again. High-speed fiber connections, especially tools and smartphones, have made it easier to gain exposure to financial markets through derivatives like CFDs.

But trading CFDs is something that takes skill and practice. So, while you may be excited to jump in and take a slice of the pie for yourself, it’s important to be disciplined, ensuring you can walk before you try to run.

If you’re considering taking advantage of the huge trading opportunities that modern technology presents, then here are the things you should do before opening your first position.

Learn The Difference Between Trading and Investing:

What You Should Do Before Making Your First Trade?: eAskme
What You Should Do Before Making Your First Trade?: eAskme

In common parlance, ‘trading’ and ‘investing’ are often used interchangeably.

However, this is incorrect and can lead to confusion as the two are very different.

The main distinctions between them are that trading focuses on the short term while investing has a longer-term time-frame, and traders don’t own the underlying asset as their positions are opened using derivatives.

If you’re not already familiar with these distinctions, you must understand them correctly before making any trades.

Research Your Broker:

Not all trading brokers are the same, and some are distinctly untrustworthy.

Therefore, you should look for registered ones with your local regulator, ensuring they follow the rules and offer any available protections in your jurisdiction.

For example, in the United Arab Emirates, the broker should hold a license from the Securities and Commodities Authority.

You also want to ensure the broker you’re using offers the instruments you want to trade.

For example, if you want to trade Forex, you’ll want to check that the currency pairs you are looking for are available.

Practice Using a Demo Mode:

We all need to practice when trying something new; it’s just part of learning a new skill, and trading is no different.

Thankfully, many of the best brokers that allow you to trade online offer a demo or practice option. One is Equiti, which has a risk-free demo mode that all new users can access.

This offers the same features you’d find in the live trading mode, allowing you to test strategies before putting them into practice in the real world.

Of course, it’s important to remember that success in a demo mode is never a guarantee of the same success when trading with a live account; however, it is a great opportunity to learn the ropes without dipping into your principal.

Choose a Strategy:

While you practice, you should read and research the different strategies you can use. In trading, technical analysis is a key element to many people’s approaches, so it’s a good idea to understand this.

There are many different approaches you can take, including scalping, which is a method that involves having a position open for just a few seconds or minutes, and swing trading, which can take several days or even weeks to complete.

In every instance, trading involves you trying to profit from inefficiencies and inaccuracies in the market. If you can spot them before most other people, you can exploit them and derive a short-term profit.

The most common approach is day trading, which removes any overnight fees that brokers often charge.

However, this means you will be using technical analysis rather than focusing on the longer-term success (or lack thereof) of any company, currency, or commodity you plan to trade.

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