Is Online Trading Right For You?

Currently there are plenty of opportunities to make money through online trading. You can setup an account with online discount broker, transfer initial capital, and you are ready to be in business. In front of home office PC you can place order to buy and sell stocks, funds, or options.

Wait! Online trading can eat your initial capital in only days or seconds if you don't know what you are doing. It is fair to say that online trading is not a zero sum game. Tt is a negative sum game! Why? Because the second you trade you already lose money by paying your broker.

Online Trading Is Not For Everyone

Yes it is not for everyone. It is only for a few who understand how financial market works. And this is fluid, 3 dimensional market. It always changes. Can you understand the effect of fed rate hike? If no, don't bother trading online. It will save you to do something else.

If you persist to be in this business but don't know much, spend sometime to learn about how financial market works. Then pick any business publication or media. Can you digest the information? Can you relate one piece of information to other consequence?

This is like chess. One move will affect many other moves. In fact many good traders are initially fascinated with chess game.

Many good traders are also former financial analyst. No wonder because they have been so close with this market in their day jobs.

Cool Emotion

Having intelectual prowess in financial markets doesn't guarantee success. The other factor is emotional intelligent. You can dump your reasoning in the midst of market hysteria or market panick. Only a cool trader with sound judgement can thrive in this business.

A good trader has to know when to enter the market, when to stay, and when to quit. Many don't know. Average trader just follows the crowd. Often they get slaughtered like lemmings.

What It takes

To be successful and rich from trading, you need to know what it takes. The list below is not intended to be knowing-all, rather it is a collection of experience.

• Have a set of trading system.

This system will provide information about market timing like when to buy and when to sell. There should be a back testing to validate the system.

• Know the risk amount upfront.

This sets the maximum loss of a given trade. Never accept greater loss no matter what happens. Act swiftly when this stop loss is triggerred.

• Cut loss small and ride your winner

This is a fundamental of long term profitable business. Set your stop loss small. But once you have a winner, add your trading size.

• Pick liquid market

Exercise With No Cost

Now you can exercise online trading without betting your money. There are online brokers who can provide simulation account. You can learn, for example, in OptionsXpress.