Investing in the stock market can be challenging, but rewarding if you know what to do. There are some basic parameters you need to follow to avoid making detrimental decisions. Below are just a few steps that any trader should take before trading stocks.
One of the most important aspects when trading stocks, whether you are trading stocks CFDs or trading the underlying asset on the stock market, is to make sure you have done your homework. Some platforms offer economic calendars, trading platform indicators and charting, which can all be used as aiding tools. All of these tools are provided on the Plus500 platform, where we offer trading on stock CFDs. You should also try to keep up to date with the latest news and trends before making any trading decisions. Market sentiment can shift quickly, and being able to act on this shift takes perception and intuition. These skills can be developed by keeping up to date with current events and understanding how they impact markets.
There are various types of trading orders that can be placed when trading CFDs on the Plus500 platform, including market orders, future orders, (pending orders) and stop orders. When a trade is executed at “market order”, it is executed at the current market price. You can also request to open a position when the instrument reaches a certain price, specified by you. This is known as future orders (pending orders).
In addition, you can choose to close your positions manually, or set stops so that the system will close them automatically with stop orders. If you set a limit stop (close at profit), your trade will close at the rate you specified, in order to help you lock profits. You can also set a stop loss (close at loss), in which you specify a closing rate, aiming to avoid further losses. Once the selected rate is reached or passed (as sometimes the price can ‘gap’ and move past the designated level), the stop will be triggered and the position will be automatically closed at the first available price. There is no guarantee a position with a set “close at loss” will close at the exact price level specified, due to slippage. This feature is free of charge on the Plus500 platform.
A guaranteed stop order guarantees a position will close at the selected rate, even if the market price gaps past it. On the Plus500 platform, this feature is available for some instruments, and a fee is charged to place this order.
Understanding the importance of timing is a key element to becoming a successful stock trader.
Traders should take the time to understand the fundamentals of the stock they would like to trade, as well as why markets move the way they do and what triggers such movements. Therefore, you should know when to enter a trade as well as when to exit your position. The timing of when to enter and leave your positions will depend on several factors, such as your general trading strategy, your risk-reward ratio, your tolerance to risk, the instrument’s volatility and any new developments in the particular stock.
Traders should take advantage of the resources widely available before they start trading stocks.
You can also continue your development in trading by using our educational resources. Plus500 offers a video guide, called “Trader’s Guide” on the website, which covers a variety of topics such as slippage. You should continue to utilise any resources you have available, no matter how long you have been trading.
It is important to take your time and start small. Use Plus500’s free and unlimited demo account to test your strategies and get some experience using the platform, and only start trading with real money once you feel comfortable. When you take the leap, you should not take considerable risks. This will help you establish your trading strategies while not risking your capital. When trading CFDs on a real money account, it’s important to remember that you should only trade with money that you can afford to lose.
Trading strategies are plans that are implemented to increase the likelihood of achieving a profitable return. As such, it’s a key factor to successful trading.
Here are some tips to take into account when creating a stock trading strategy:
Knowing when, what and how to trade will increase your chances of having a profitable trading experience. You must also keep in mind that trading can be risky, so it's always best to build a strategy based on knowledge, test it, and stick to it.