Without a decisive game plan in place, trading can be considered exceptionally high risk and more of a gamble instead of a smart investment strategy
Dany Mawas, Regional Director at INFINOX Capital says there are several factors that are required for successful trading, and this is especially important for beginner traders to take note of.
“Trading is increasing in popularity in Africa, with more people spending time online and seeking additional incomes as a result of COVID-19, however many don’t know where to begin,” he says.
In order to assist these potential traders, Mawas points out some some key do’s and don’ts that beginner traders should consider to start successfully trading:
Do have a game plan: Without a decisive game plan in place, trading can be considered exceptionally high risk and more of a gamble instead of a smart investment strategy. It is important to research and develop an approach that works based on the financial markets. For example, traders should consider rules that must be satisfied before entering into a trade such as ‘is the trade following the same trajectory as the greater market’, amongst others.
Do join a community: Another way to develop a strategy is to join a community trading app, such as IX Social. This allows traders to access key financial markets while sharing knowledge, trades and experiences with like-minded traders. Essential for beginners, IX Social allows traders to auto-copy top traders, with options to source the most followed, best live trades, most copied trades, and the most profitable trades – all instrumental in building trading acumen.
Do your research, and then do some more: The internet is full of valuable information available at the touch of a button. As such, online traders should always do their due diligence when it comes to the broker they plan to partner with, including the markets they plan to invest in.
Don’t fall victim to scams: Trading scams have been around since the advent of the practice, and while the schemes may be evolving, beginner traders should equip themselves with adequate knowledge and education before entering the market. Adding to this, traders should only partner with reputable brokers that offer a variety of investment opportunities, coupled with complying and being recognised by legitimate and prominent regulatory authorities. It’s also important to note that brokers with a physical presence in the countries they operate in can offer an additional layer of client service and assistance to traders.
Do set a budget: As with the majority of investments, online trading comes with a high risk of losing money due to poor investment choices. Unless a trader has an endless supply of funds, they should instil a budget they can afford to lose without it impacting their direct livelihoods.
Don’t put your eggs in one basket: It’s important to have a well-diversified portfolio to take advantage of any market condition. Those looking to diversify their portfolios can start by investing in asset classes that have low or negative correlations so that if one trade falls the other can potentially counteract it. Furthermore, ETFs and mutual funds are easy ways to select asset classes that will diversify your portfolio.
Don’t let emotions take over: While many beginner traders fall privy to this, trading based on an emotional impulse often results in traders buying and selling at inopportune times. One needs to understand the motivations behind emotional trading to mitigate the risk of making poor trading decisions.
“While trading offers great benefits, it is vital for traders to follow a set of guidelines and helps bring consistency to their strategy. This will ensure their longevity, and prosperity, in the game,” concludes Mawas.