One of the forms of investment in the financial markets that have become more popular in recent years is so-called trading.
Trading is nothing more than a speculative way of obtaining profits in the financial markets by carrying out operations of short duration, usually less than a day, to achieve small returns through multiple operations.
To achieve this objective, leveraged financial products are often used, such as credit stock accounts, futures, or CFDs, which allows the trader to take positions with large amounts of money only by having a small part of it.
Due to the great possibilities of obtaining returns above the average operating under intraday trading strategies, the number of people attracted by this operation is huge. On many occasions, they begin to trade without being aware of the risks that they carry.
Therefore, in this article, we will give a series of basic principles that anyone interested in trading should know before launching.
Basic trading principles for beginners
To increase the chances of success when launching ourselves to operate in the financial markets through trading strategies, it is necessary that we be clear about some things to reduce the chances of failure.
The first rule we must consider when considering trading is investing money that we do not need.
It would be foolhardy for all of our investment in the markets to go through a trading account. Trading is totally speculative, and there is a risk of losing part of the capital allocated to this operation. Therefore, the idea is to allocate money to trading that we can afford to lose.
Trading is an operation in which our positions run many risks, so it is necessary to implement mechanisms that make us limit these possible losses if they occur. One of the best-known mechanisms to achieve this is stop orders.
A stop order consists of establishing a sell order (in the case that we have bought) or a buy order (in the case that we have sold short) at a certain price level, causing the closing of the operation immediate and thus limiting the loss incurred.
When carrying out trading operations at the online broker DotBig, both the product used and the market it operates are fundamental aspects to consider.
To begin with, not every market is valid for successful trading operations. The perfect market for this has a large volume of trading (which will allow it not to be easily manipulated) and whose commission cost by the broker with which we operate is not too high.
In addition, the choice of the financial product that we use will also be of the utmost importance since it is not the same to operate with stocks or futures as with CFDs, for example. The difference lies in the regulation of the market. In the case of options and futures and trading in shares, when they are listed on regulated markets, there is a clearinghouse that looks after the interests of the parties, protecting them in the event of a problem.
In the case of OTC products (CFDs, binary options ...), as they are not in regulated markets, there is no clearinghouse; they are simply an agreement between parties, which means that in the event of some type of problem, there is no protection.
Last but not least, it is necessary to acquire prior training in operations to increase the chances of success in the market. It is advisable to adopt a system to operate in the market and test it previously in an account with virtual money to acquire the necessary skills to successfully go to the real market.