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The do’s and don’ts of trading and investing: A guide

Trading financial instruments has been a popular activity ever since stock markets began to go big, decades ago. With an explosion in the popularity of online trading in recent years fueling the trend even further, it’s now something anyone can do. But the downside of anything that becomes popular, of course, is that a culture of misunderstanding and misinformation can spring up around it – and for traders who are new to the scene, this can quickly become a loss-making problem. Here, then, is a guide to some important do’s and don’ts if you’re looking to get started with investing in major financial products.

Do set limits

When you start out as a trader, it’s important to make sure you don’t set your goals too high. If you have a spare $10,000 to invest, one of the worst things you could do is deposit all of it and start making large sum trades right away. It may seem surprising, but some new starters actually do this if they feel confident enough – but no amount of reading or virtual account trading makes this a risk worth taking. Instead, it’s a good idea to set reasonable limits until you become highly skilled.

Don’t get emotional

Trading can be an exhilarating experience, and part of the appeal for many is the excitement. But traders who put feelings front and center in their trading experience sadly tend to be the ones who don’t do quite so well when it comes to making profits. That’s because it leads to poorly thought-through decisions, such as closing a position in panic at the first sign of a market dip, only to find the market goes straight back up once the item has been sold and the position can no longer be re-opened. Instead, devising a strategy based on reason and logic – and then sticking to it no matter what – means that fewer heat of the moment decisions will be taken.

Do find some advice

Seeking out some help is always a good idea before beginning a trading career. If you have an experienced trader in your personal life or business network, why not ask them for tips? If they say yes, you’ll end up with a source of excellent advice on everything from deposit amounts to appropriate brokers – and the worst they can do is politely decline. Other sources of information are also widely available, especially on the web. Interesting investment advice for beginners is available at FatCat, while it’s also possible to scan the pages of major global financial newspapers, including the Financial Times or the Wall Street Journal, to find tips.

Before plunging into the world of trading, then, it’s wise to get all your ducks in a row by seeking advice, setting limits and developing the right mindset. If you don’t do these things, you could be placing yourself and your burgeoning investment career at a disadvantage – and that could lead to unexpected financial losses as well as the loss of your morale.

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