Published On: Fri, Jun 1st, 2018

Student tips for successful trading

Funding college and university is never easy, and with each passing year, the margins get tighter and the student debt crisis grows. The idea of doing a little something to supplement your financial resources is nothing new, and students have been doing bar work and waiting tables since time immemorial.

In the digital age, there are more opportunities for making money than ever if you know what you are doing, and when it comes to trading, that last caveat is vitally important. Do it right and you can really make your money work harder and come out the other side with a tidy profit. Approach it the wrong way, however, and you might as well blunder blindly into a bookmaker’s and put your entire student loan on a horse.

photo/ Gerd Altmann

Here, we offer up some tips for trading without tears.

1) Learn your craft

If making money from trading was easy, everyone would be doing it. Whether you are looking at stocks and shares, Forex trading or the Futures exchange, if you go into it with only half an idea of what you are doing, you will come away with only half of your money intact.

There’s a great range of online resources on sites like Admiral Markets and Investopedia where you can learn the nuances of trading and study the stocks and markets that are of interest to you.

This is also the time to work on your trading strategy and decide just what form it is going to take. You’re not going to become an expert overnight, and some areas of trading need time and dedication. If this is going to be unrealistic given your study commitments, it might be worth looking at investment funds, as these do not demand such in-depth and nuanced knowledge of the markets. The other option is, of course, to make use of a broker to actively manage your investments, but this will naturally incur higher administrative fees.

2) Practice with a demo account

Once you think you know what you are doing, start practicing. But don’t start risking any real funds yet! Now is the time to start looking for the best mobile Forex trading platform or share dealing apps to use when you start trading for real, and one of the key properties you need to look out for is a demo account.

It’s a feature of many, but not all, of the top platforms, and it essentially allows you to conduct trades in real time and using real stocks, but without real money. OK, so it means you won’t make any profit if your trades go well, but more to the point, it means you can make those beginners’ mistakes and learn from them without losing your shirt.

3) Spread the risk

Everyone knows the danger of putting all your eggs in one basket, and having a diversified portfolio is one of the most fundamental rules of trading. It’s a rule that applies across the board, from the Wolves of Wall Street to the hobby investor. The more diverse your portfolio, the better protected you are against catastrophic loss, as different investments will react in different ways to events in the broader economy.

4) Draw boundaries

Another basic rule of trading is only to trade what you can afford to lose. Conceptually, you might instantly say you can’t afford to lose anything, but if that is genuinely the case, you need to seriously rethink whether you want to start trading.

Take a pragmatic look at your finances, assess your monthly income and expenditures and from there, calculate what you can realistically afford to put into a trading account. If you don’t start out as you mean to go on with firmly defined boundaries, you can easily find yourself robbing Peter to pay Paul and getting into further debt on one had to fund your trading activities on the other. And that is an equation that is never going to end well.

5) Stick to the script

All of the foregoing sounds easy enough on paper, but trading can get intense and the problem is that the heart can easily overtake the head. When things go very well or very badly, it is a common phenomenon to see amateur traders forget all about their strategy, throw caution to the wind and try to either capitalise on good fortune or chase that loss with higher risk activities to try and get it back.

Here’s the point: Students might be many things, but stupid is not one of them, so the trick is to recognize when you are starting to go off the rails and make yourself stop, take a walk, watch some TV or do whatever you need to do to get your head together before you return to your trading platform.

Author: Stacy Smith

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