You want to be a successful trader, right? You want a solid track record and plenty of money in your account. If you're willing to put in the work, there's no reason you can't do that but make sure you're doing everything correctly so that it pays off.
Making mistakes when learning how to trade is inevitable, but it can be avoided with proper preparation and research on your part. We've compiled the most common digital securities trading solutions gone wrong so that you can avoid them if they ever happen again.
What is digital securities trading?
Digital securities trading is the buying and selling of stocks, bonds, options, or other financial instruments and assets through specialized software that provides an interface for making purchases. Platforms also allow you to trade cryptocurrencies and a wide variety of assets using your computer or a brokerage service online.
If you have an online brokerage account, you're capable of securities trading. With digital securities investments, it’s hard to predict what will be available. Most significant, publicly traded companies have shared on the market and can be purchased.
You may find bonds, mutual funds, and other alternative investments available to trade. Many digital securities trading sites have contract options, futures contracts, and other derivatives.
Digital securities trading mistakes
Digital securities trading mistakes are common. The markets are volatile, and there's a lot of money on the line when you make trades. Here are some errors you should avoid when trading digital securities.
- Being greedy: Your goal is to buy low and sell high, right? Sure, but not at any price; act in your own best interest over that of the marketplace's volatility! Don't chase after that one stock that just went up 50% in two minutes; even if it seemed like a good idea at the time, what goes up must come down.
- Being hasty: Patience is a virtue. Making two trades in a day may lead to selling at the bottom and buying at the top.
- Selling for a loss: Don't let your fears get the best of you. If a stock has been steadily dropping, and it's at 10% or 20% below your break-even point, sell! You're taking too much of a loss, and you should sell while you have time to buy back in cheaper. Panic sales are rare, and they happen because someone didn't have time to react appropriately. Hold onto your stocks until they rebound; waiting an hour or two can save you thousands.
- Selling too soon: If a stock has been steadily dropping, and it's at 10% or 20% below your break-even point, sell! You're taking too much of a loss, and you should sell while you have time to buy back in cheaper. Panic sales are rare, and they happen because someone didn't have time to react appropriately. Hold onto your stocks until they rebound; waiting an hour or two can save you thousands.
- Buying on weakness: Don't buy a stock unless there's good news on the horizon. Weakness is an opportunity to stockpile; if performing by 20%, don't take advantage of it. Wait for the price to come back up.
- Over-trading: Don't put more money into a trade than you can afford to lose. No one ever went broke taking a profit, right? If your goal is to make money trading, only move in and out of stocks when you have the extra cash to keep the trading game going. Trading is not quick cash; it's about managing risk and keeping your head down for the long haul.
- Not accounting for taxes: The IRS takes a hefty chunk of the profits from traders, so figure out your tax rate before you begin trading and take that into account when deciding how much money to put into each trade.
- Neglecting to read up on a company before investing: Always look into the businesses you invest in. Read message boards and official news releases for as much information about the company as you can get. Talk to friends, family, or someone in the business world who could give you a firsthand account of what sort of character a CEO is; reading annual filings can be helpful, but they aren't entirely accurate. Half-baked knowledge isn't going to make you money!
- Relying on tips from strangers: There are only two sources for tips that won't result in getting scammed: your close friends and family and reputable financial websites. Anyone claiming to be offering trading advice online is not just lying; they’re probably trying to scam you.
- Not covering your bases: It's much better to be safe than sorry. Insurance is a good idea, but it should always be a last resort. Make sure all of your bases are covered before you start trading independently.
How to Trade?
There are many different ways to trade, but they all boil down to a few main principles. First and foremost, trade what you understand. If you know the company well enough and know the stock's fundamentals, you're going to have a much better chance of making money; don't play hard to get by, hoping that something will just come to you.
Another important thing is self-control. Don’t conform your trading habits to what other traders are doing; there will always be someone out there doing it wrong. If this is your first time trading, it's going to be tough; use as much discipline as possible while you're learning the ropes.
Last but not least, diversify your portfolio. Don't trade your entire portfolio for a single company. If you're invested heavily in one company, and it has an unexpected stock surge, you're going to come crashing down to the ground with a bunch of other traders.
Always try to spread out your investments across several different stocks; each stock will have its ups and downs, but they'll all move together as the market moves.
While there are a lot of dangers involved with digital trading securities, there are also real potential rewards to consider. It's important to understand that there's risk involved when you're making trades, but it's equally important to learn from past mistakes so that nothing like them can happen again.
Keep in mind that things can always go wrong, but you can learn from your mistakes and become a better trader.
We're looking forward to helping our newbies learn how to trade cryptocurrency. What do you think about these methods? What are your thoughts about trading with INX? Also, don't forget to follow us on social media for more updates regarding this topic.