5 Guide Questions to Help You Figure Out If You Are Ready to Trade
Trading is a risky business. You may have known all about it but its possibility of raking in huge amount of profits is what draws you in. But are you ready to start trading? Before risking out your hard-earned money, ask yourself these 5 questions to figure out if you are absolutely ready to start trading.
1. Have you developed a trading plan?
Your trading plan is a blueprint that helps you make a clear decision without involving any emotions especially when money is on the line. Write your trading plan based on careful analysis of the markets you intend to trade.
2. Have you practiced on a trading simulator?
A good trading simulator lets you become familiar with price quotations, market terminology and the general behaviour of a particular market without putting any of your money at risk. If you are not making any profits on the trading simulator, we’d say keep practicing until you are making profits.
3. Do you know how you are going to enter a trade?
There are many ways you can place a trade. Buy-stop orders means you want to buy a security at a higher price than the offering price, market orders means you want to buy or sell immediately at the best available price and limit orders means you are buying or selling a set number of shares at a specified or better price. If you are familiar with these terms then you are good to go.
4. Do you have adequate capital if you lose?
We’ve said it once, and we’ll say it again. Trading is a risky business and you stand to lose your money. Make sure you capitalize your trading account with money you can afford to lose. Don’t risk your hard-earned money-for-rainy-days to trade. Don’ gamble away your groceries money or your retirement fund.
5. What is your money management plan?
It is absolutely fundamental to have a sound money management as it helps you to manage your trading risk and keep losses small. Smart money management is when you are starting with enough capital to withstand several losing trades and have enough money to be able to add to your trading account.
Wan Zuraiha Wan Zakaria is a staff writer at Oriental Pacific Futures (OPF) where she writes on investment and trading. OPF is a futures and options broker based in Kuala Lumpur, Malaysia and provides electronic trading, brokerage and clearing services to retail and institutional traders since 2007. OPF is licensed under the Securities Commissions of Malaysia and offers cash-settled derivatives instruments traded on Bursa Malaysia, as well as select major derivatives exchanges around the world.
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