The easiest ways to grow your wealth is to have multiple streams of income – and, keeping your expenses consistently lower than your income. However, it is not always easy to have multiple streams of income if you have a regular 9-to-5 job because you’ll spend your most productive hours on the job. Interestingly, there’s money to be made in the financial markets where you can book a tidy profit from trading stocks, forex, CFDs, and commodities.
The Internet has made trading readily accessible to everybody and very few people actually set up shops as active day-traders glued to the front of computer screens all day. This piece provides 3 actionable insights for trading in the financial markets on the side while keeping a traditional job.
- Find your trading style
The trading style you adopt and the kind of securities that you’ll trade is a function of your personality and your schedules. If you are risk-averse, you’ll most likely not want to trade cryptocurrencies because of their high volatility. Interestingly, Julio Stephens, a trader on Olsson Capital says that “the inherent volatility in cryptocurrencies presents an incredible opportunity for the discerning trader to make exponential gains.”
If your schedule keeps you away from trading until very late at night or early in the morning, you might have to resign to trading forex because the stock markets will be closed at those times.
In essence, you’ll need to decide if you want to be a swing trader or a day trader. Traders who have limited time to access the markets will find swing trading more agreeable to their schedules because don’t need to monitor the markets all day. Traders interested in forex can still get by with day trading because the forex market is always open round the clock.
- Take the time to ride the learning curve
Nobody is born an expert trader, you’ll still need to take the time to learn and understand how the market works. One of the greatest injustices that you can do to yourself as a trader is to frequently change your trading system every week/month. As a beginner trader, mistakes are inevitable, but stop/limit orders can help you manage the downside. However, system-hopping or changing trading strategies every time you lose money in a trade will stop you from mastering any trading style. Study different trading strategies, backtest your strategy against historical data and then stick to the plan for a decent amount of time.
However, sticking to a trading plan doesn’t necessarily mean that you should continue using a strategy blindly even when it is obvious that you are on a lost cause. You’ll need to let go of every underlying mindset that leans towards gambling instead of a logical participation in the markets. A good way to find out if your trading strategy is due for change is to review your trades – a loss doesn’t necessarily mean a bad trade if you have followed your trading plan.
- Pay attention to the dangers of demo trading
For a beginner trader, demo trading is a great tool to learn how the market works without risking your trading capital. You get to try out different trading strategies, understand how you behave when you are excited or under stress. Demo trading also helps you to pay attention to the psychology of trading. However, one of the perils of demo trading is that people unconsciously reinforce unhealthy trading practices because their money is not on the line.
Secondly, newbie traders could get themselves hooked on a demo-trading paralysis in which they are hesitant to take the plunge to start trading with their real money. If you are serious about being a successful trader, 6 months to one year is a good enough time to understand how the market works. You can then go ahead to start live trading with a small fraction of your trading capital. You can then add more funds to your trading capital as you grow more confident in your understanding of how the market works.