We asked a trader some common questions newbie traders might have – Mothership.SG
The idea of trading can be both incredibly appealing (making gains) and incredibly frightening (making losses).
If you’re one of the many people looking to take a look at trading, we chatted with Oriano Lizza, a CMC Markets Sales Trader, to get answers to a few common questions newbies might have.
How to start trading?
This could be both the easiest and the most difficult obstacle to overcome.
In fact, instead of answers like setting up a brokerage account, deciding on your lucky number, asking the strange man down there for help, Oriano gave the equivalent of a cold shower as a first step. .
“The first step is obviously to research the type of product you want to trade and then you are able to narrow down your search box or identify the types of brokerage firms that offer the product you are looking for. “
There are literally thousands of commodities you can trade, from tech stocks like Apple to Netflix to commodities like gold or coffee to different indices like the NASDAQ 100 or the US30.
Once all your research is done, your next step is to open a demo / practice account in order to familiarize yourself with the platform. Platforms vary in their navigational complexity, so it’s important that you are comfortable with which platform you choose.
By the way, the deadlines it gives are expressed in weeks and months, not minutes and hours, suggests Oriano, yes you guessed it, even more in-depth research.
Research the brokers you will hire. He recognizes that many people are “price sensitive” and that many new market entrants are recently offering attractive trading promotions.
However, one has to choose between a global broker, a local broker whether the broker is licensed or not, and many others.
“There are a lot of unlicensed brokerages that keep popping up in the online space. But they don’t offer, as a consumer or a retail investor, the same kind of protection when it comes to customer deposits and funds, so it’s always important to do your due diligence.
Confused about how much time and effort you are comfortable with? Demo accounts.
Yet another misconception with trading born from years of watching Wall Street shows loosely related to trade was what the whole process looked like.
People stare at the screen intensely for fear that arrows will dive the moment they take their eyes off the screen.
In reality, trading “can be quite flexible” and often comes down to experience.
Experience, and some would say patience, is not plentiful for new traders, however.
According to Oriano, a lot of people just want to “open the account, fund the account, and start trading” without building the foundation.
“Placing the trade should be the easiest part of the process. “
The time it takes to slowly acquire the experience recommended by Oriano for trading is not only to better understand the market, it is to better understand yourself, “because ultimately it is your capital or your money you put into play ”.
To get this much needed experience, Oriano recommends using the demo account if you register with CMC Markets.
“We advise clients to use a demo account for three to six months, or even longer, until they are comfortable starting to trade.”
Oriano sees this as a great way for new traders to develop their own strategy, understand their own risk profile (how much they are willing to risk) and how they react to losses in the market.
“Because at the end of the day, people only see the end goal, which is the potential to make money, rather than taking the steps up front to reach that end goal.”
Is the increase in the number of new traders a recent phenomenon, what should I watch out for?
You may have seen some really original stories about the stock markets lately.
According to Oriano, this coincided with another type of client making waves in the stock market, the Millennials.
“In previous years, a large part of the clientele and population was the older generation, who established themselves and had additional capital to deploy in the business.
Today we are seeing a younger population appear, looking for alternative, entrepreneurial ways to make money outside of your traditional nine to five jobs.
In a way, the FOMO appeal of the stock markets could be at an all-time high right now.
Oriano also pointed out this behavior:
“No one really wants to miss out on the stock market, or any other particular market, like crypto.”
How often should a new trader refresh their brokerage app?
New traders look at their phones more than someone who has just been dumped. Perhaps it is the fear that they will miss a peak that secures their retirement, or a dip that would add a few more years to the end point, so it feels like new traders and refreshing their trading app is a big deal. perfect match.
Oriano naturally took a more nuanced approach, “it really depends on your strategy”.
It lists these strategies into three broad categories:
“Some people have a long-term strategy, where they buy and hold for long periods of time and just look for small incremental gains.
Alternatively, there are people who trade short to medium term, swing traders, where they place one to five trades every two or three months when the opportunity arises, so there is no real rush. constantly looking at the portfolio.
Then, at the extreme, there are day traders or intraday traders who look at market movements in very short time frames and profit from spikes in volatility or price fluctuations on particular commodities.
The aforementioned GameStop incident falls squarely into the third category.
These profiles are important because of what it means for your other non-business aspects of your life.
“I would always dissuade people from getting so emotionally involved in trading that they are constantly looking at their portfolios because you have your own life to live on.”
What Oriano suggests instead is trying to find a strategy that works and fits your lifestyle.
“If you are someone who has a lot of free time. Of course, you may be able to afford day trading and constantly watch the screen.
If you are someone who has a full time job and only have time to trade for a small window during the day then you may want to look at other swing strategies or less active strategies. and more passive so as not to be constantly staring at the computer screen.
Is there a minimum amount that you would suggest someone have to get into trading?
At the end of the day, you just need to have enough money to cover the margin of the trade.
But before you withdraw your bank balance, you might want to take note of some tips.
Oriano says a rule of thumb is that whatever you put on; you should be comfortable losing.
“So in the event that you lose all the money that you put in the account, your whole life will not be affected financially and you will not have to start borrowing money, selling assets, it will not affect you. This is not what the online brokerage or the trading space is trying to promote.
Trade according to your risk profiles and your means.
This means that when the market turns against you, “you will not suffer a setback, your life will not be negatively affected”.
What Kinds of Mistakes Do Beginner Traders Make?
One point that Oriano constantly reiterates is the need to develop strategies and understand the risks.
He puts it this way, if you don’t develop the strategies, what is basically done is ‘punt’, betting on the price going up or down, instead of the actual areas where the opportunities are. .
This need for strategy often takes a back seat when the next big thing is plastered all over the net, with strong statements from millionaires.
“So it created a false reality for a lot of these new traders because they just put in money, they placed trades, the market kept going up, they kept making money and they think that trading is easy and that you don’t need to have a strategy.
What is good when prices hit historic highs, but what happens when there is a change in the direction of the market?
This in itself is something that novice traders might struggle with.
“When there is a change in the direction of the market, these particular customers, because they are new to the market, don’t know how to handle things when they start to take losses.
In general, what we would see is that customers keep charging or just hope the market will come back in their favor. “
Oriano is making it clear that a perpetual trade on rising prices is not a good tactic.
“And that’s obviously not a strategy, hope is not a strategy.”
So how do you avoid these mistakes?
You guessed it, the demo accounts.
“Demo accounts help you strategize, develop risk management, while helping you work on your patience and discipline.
It is important that newbie traders use the demo account as if it is their own approach to capital and trading to provide an accurate reflection of their trading results.
But like everything, Oriano emphasizes that “it’s a game of consistency,” and slow incremental wins are the cornerstone of long-term success.
(You can create a demo account on CMC Markets here)
Are there any other points that newbie traders could take into account?
“Try to muffle the noise of the wider market and really spend time developing and honing your own skills and understanding yourself, because often what you do is trade against your own emotions and your own. feeling of the moment.
So if you understand this, you will have the opportunity to survive trading much longer and also be able to keep those profits constant, because the longer you are in the trading game, the more market cycles you see. .
What we often see are clients trying to trade four to five different asset classes, and within those asset classes, four to five different products.
In order to easily monitor such a range of products depends on your strategy, it is therefore important that you make sure that you have set your limits on what you want to trade before entering the market.
The most profitable traders are individuals who identify their own strategy and risk management and are disciplined enough to engage in them even during times of uncertainty or heightened volatility.
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This CMC sponsored article made the writer think of a stock photo pun.