Reduce your losses
All traders suffer losses from time to time. So try not to panic if you make a bad trade. However, think carefully before attempting to restore what you have lost. It’s easy to fall into the trap of trying to break even when you’ve made a loss, but most of the time, this attitude will tend to exacerbate your losses. Instead, accept the odd loss and part of the trade and focus on your long-term profitability rather than an isolated loss.
Backtest potential strategies
Traders employ various strategies when playing the markets, but finding the right one for your needs is not always as easy as you may think. Before using any new active markets plan, test it against historical data. Using backtesting software is an easy and accurate way to do this. Once you know how the strategy would have worked, you can determine its effectiveness and decide whether or not to use it in the future.
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Diversify your portfolio
Diversification can be an effective way to protect your capital. Investing in stocks or commodities that react differently to market events can help offset potential losses and protect your capital to some extent. Investing in different companies or making different types of investments cannot put all your eggs in one basket and reduce the risk of major losses.
Now that you can make trades yourself without using a broker, trading can be much cheaper. However, even relatively low brokerage fees can hurt your profits over time. By looking for reputable brokers or platforms you can ensure that you are not paying beyond the odds on trades. After all, you want to keep every penny of what you make as a trader.
Show trade awareness
You may not have to respond to every news, but knowing what is going on in the world is important if you are to be a successful trader. An environmental disaster, political unrest, or even new legislation can have a significant impact on markets. So you need to be ready to respond when necessary.
Plan your investments
As new opportunities arise and existing investments mature, you should proactively manage your trades. By strategically thinking about the risk you want to take, you can identify the trading instruments that are most likely to produce a return in the short, medium and long term, and that way maximize your risk returns in 2021.
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