Key Strategies to Learn Trading Online And Get Higher Returns
In finance, an electronic trading platform also known as an online trading platform is a computer software program that can be used to place orders for financial products over a network with a financial intermediary. Various financial products can be traded by the trading platform, over a communication network with a financial intermediary or directly between the participants or members of the trading platform. This includes product stocks, bonds, currencies, commodities, derivatives, and others, with a financial intermediary, such as brokers, market makers, Investment banks, or stock exchanges.
Such platforms allow electronic trading to be carried out by users from any location and are in contrast to traditional floor trading using open outcry and telephone-based trading. Sometimes the term trading platform is also used in reference to the trading software alone.
Electronic trading platforms typically stream live market prices on which users can trade and may provide additional trading tools, such as charting packages, news feeds, and account management functions. Some platforms have been specifically designed to allow individuals to gain access to financial markets that could formerly only be accessed by specialist trading firms. They may also be designed to automatically trade specific strategies based on technical analysis or to do high-frequency trading.
Electronic trading platforms are usually mobile-friendly and available for Windows, iOS, and Android.
Key Strategies for higher returns are:
- Give Value to Knowledge:
In addition to knowledge of basic trading procedures, day traders need to keep up on the latest stock market news and events that affect stocks—the Fed’s interest rate plans, the economic outlook, etc.
Scan business news and visit reliable financial websites. And stay informed about the companies where one wants to invest.
- Set funds aside:
Assessing the capital one is willing to risk on each trade is important. Many successful day traders risk less than 1% to 2% of their account per trade. If one has a $40,000 and are willing to risk 0.5% of their capital on each trade, their maximum loss per trade is $200 (0.5% * $40,000).
Set aside a surplus amount of funds one can trade with and they are prepared to lose.
- Start Small:
As a beginner, focus on a maximum of one to two stocks during a session. Tracking and finding opportunities is easier with just a few stocks. Recently, it has become increasingly common to be able to trade fractional shares, so you can specify specific, smaller dollar amounts one wishes to invest.
That means if Apple shares are trading at $250 and one only wants to buy $50 worth, many brokers will now let one purchase one-fifth of a share.
- Cut Losses With Limit Orders
Decide what type of orders one will use to enter and exit trades. Will the person use market orders or limit orders? When one places a market order, it’s executed at the best price available at the time—thus, no price guarantee.
A limit order, meanwhile, guarantees the price but not the execution. Limit orders help one trade with more precision, wherein one can set their price (not unrealistic but executable) for buying as well as selling. More sophisticated and experienced day traders may employ the use of options strategies to hedge their positions as well.
- Stay realistic about profits:
A strategy doesn’t need to win all the time to be profitable. Many traders only win 50% to 60% of their trades. However, they make more on their winners than they lose on their losers. Make sure the risk on each trade is limited to a specific percentage of the account, and that entry and exit methods are clearly defined and written down.
Writer ~ Isha Adhikari