It is no wonder that myths have crept into the world of online trading. Technology has democratized the global financial markets, and this has perpetuated many myths and misconceptions by people that do not properly understand the markets.

Trading myths are essentially false beliefs about trading that are not backed by facts.

Here are 10 trading myths debunked:

Trading is Simply Gambling

It is easy to view trading as a game of prediction and chance, just like gambling. In both trading and gambling, ‘speculators’ risk an amount of money hoping to earn a return. But the outcome of gambling is solely dependent on luck,  but in the world of trading, luck is not a viable strategy.

If you are a trader who does not have a proper trading plan or solid knowledge and understanding of what you are doing, you are essentially gambling. Placing trades based on a gut feeling or without reliable data to back up your decisions is highly risky, and your trading performance will not be consistent.

Trading is a skill that requires an understanding of market trends, price movements, important technical and fundamental information, as well as solid risk management. When you are trading, you are not exactly in a game of luck and prediction; rather, you are in a game of probability where you use your knowledge and skill to “play the odds to your favour”.

Trading is Easy

This is one of the most common online trading myths. Online CFD trading may be easily accessible, but the activity itself is far from easy. A simple search online about trading will reveal plenty of success stories by random people who are literally ‘milking the markets dry’. But a deeper assessment would reveal that most people who broadcast their trading success are just marketers and not actual traders.

The internet has been the main driver behind this myth as marketers use all sorts of tactics to lure people with “get rich quick” and “make money from home” schemes. With the promise of being able to start trading within minutes and making profits from day 1, it is no wonder that the “trading is easy” myth continues to spread like wildfire.

The reality is that most retail traders are unable to achieve consistent success in the markets. This itself should highlight how daunting it is to become a successful trader. Like any performance skill, trading requires a lot of market knowledge and research as well as strict discipline and commitment to refine and perfect. You must be willing to put in the work and commit to relentless practice and improvement if you are to achieve success in the world of online trading.

Trading Requires Huge Capital

Another trading myth is that you require a lot of capital to participate in the global financial markets. This might have had some truth decades ago when retail traders had to rely on brokers to place all their trades, and the brokerage certainly wasn’t going to waste resources on a client with a few hundred dollars to invest.

The other challenge back then was the minimum lot sizes, with many assets requiring a substantial minimum trade size.

Thanks to online platforms trading has become highly accessible for retail traders, especially CFDs. This has opened up opportunities to trade micro lot sizes and to start trading with a few hundred dollars of capital.

CFDs are also leverage products, which means traders can control positions that are much larger than their capital outlay. At AvaTrade for instance, you can access leverage of up to 400:1 for certain assets. That said it is important to tread carefully with leverage because it also exposes you to potentially higher losses as well.

With a good trading plan, you can get started with a relatively small amount of money and compound it to a capital level that is consistent with your goals. The key is to have a solid trading plan and risk management strategy that will help you achieve longevity in the markets.

You Should Use Many Indicators

Many new traders are easily tricked into believing that they can trade better by using many complex indicators. This can actually cause confusion or analysis paralysis, and lead to the making of bad trading decisions.

Clarity of trading signals is very important in the markets, and using many indicators does not provide this. The key is to find indicators that can complement each other in their functions.

Having a rather clean chart prevents the risk of information overload that ultimately limits quick and accurate decision-making when trading.  Knowing which type of analysis and indicators to use in different scenarios is crucial, and as with many things in life, sometimes “less is more”.

Indicators Do Not Work

An online trading myth perpetuated by some market participants is that indicators do not work. The problem is that many traders depend on indicators to generate signals for them. But indicators are not meant to be signal generators, but rather information providers.

For instance, a moving average sloping upwards is not a signal to go long, but simply visual information that current prices are higher than past prices. It is the job of the trader to put this information into perspective and generate a trading signal or idea according to the context of the markets.

Indicators are simply mathematical formulas that provide visual information about the behaviour of price. So, when used for their intended purpose, indicators do indeed work.

High Leverage Equals Big Profits

Another CFD trading myth about leverage is that higher leverage levels equal bigger profits. Granted, a higher leverage level will translate to more profits if trades go in your favour. But if the opposite happens, you stand to lose big money as well.

Success in trading is more about taking care of risks than chasing profits. Reduced and managed risk exposure in the markets ensures that you can stay in the markets even if you experience some losing trades.

Traders should strive for an optimal leverage level that is in tandem with the level of trading knowledge, skill and experience. If you are still learning, a conservative amount of leverage is recommended.

Demo Trading is Useless

There is no real money to make when you trade with virtual funds, but demo trading is certainly not useless. Neither is it a tool for beginners only. A demo account is a useful learning tool, and learning never ends in trading.

Just like a top athlete consistently trains and practices before competing to hone their skills and strategies, as a trader, you need to do the same.

Even if you already have a real account, a demo account can help you to practice and try out new or tweaked trading strategies, risk-free. You can also use a demo account to try new asset classes. A demo account is your training arena, and it can help you to constantly learn and perfect your trading craft.

Place Many Trades to Earn More

On the surface, it is easy to believe that if you have a good strategy, you can earn more profits if you trade more often. Online financial markets are open practically round the clock, but it does not mean you should be looking for profits 24/7.

Placing many trades decreases the edge of your trading strategy. It gets you exposed to the risks of the market more often than necessary while piling up your trading costs. You may also tend to apply your strategy prematurely.

Trading requires patience. You have to wait for high-quality, high-probability opportunities to unfold. It is about quality, not quantity. You must have a solid trading plan and stick to it with patience and discipline.  Once again, the “less is more” concept prevails.

You Cannot Trade by Yourself

In the age of social media, we have become accustomed to seeking validation before making decisions. Some traders do not have conviction in their trading ideas and have to seek secondary opinions before implementing them.

There is nothing wrong with learning from trading mentors and professionals, but the idea that you cannot trade by yourself is an online trading myth. With patience and continuous learning, you can get a good grasp of the online trading markets and chart a path for your own success.

There are many educational resources available for the willing learner, and you can also use a demo account to test your knowledge without risking real money. With dedication, you will be able to develop a profitable trading strategy that will help you achieve your trading goals.

Trading is a Scam

Trading is not a scam! In every aspect of our lives, there are scammers, from selling fake brands to phishing schemes. The global financial markets are a huge goldmine, and it has attracted many unethical players who prey on unsuspecting traders.

Unfortunately, there are many shady online brokers, that tarnish a legit industry and exacerbate the “trading is a scam” myth. This is why is essential to only trade with reputable and regulated brokers, like AvaTrade.

Aside from the bad actors, many unsuccessful traders believe the entire trading thing is just a big scam. It is like a big rigged system designed to simply generate losses for participants. But this is not the case.

The global financial markets are real, and participants include governments, central banks, major banks, and multinationals. The problem is that most traders start with the idea that online trading markets are get-rich-quick platforms. When they fail to make quick profits, they simply brand it as a scam.

It is important to understand that trading is a business, and every business requires proper planning, learning, risk management, patience, and discipline to succeed.

Final Word

There is plenty of information out there about trading. But some are just myths that have no factual basis. Every trader needs to keep seeking more trading information, but you must be careful not to be held back by myths and unsubstantiated rumours that will hinder your success in the markets.

Are you ready to experience the realities of online trading?

Open a demo account with AvaTrade and start trading!

The post Top 10 Online Trading Myths Debunked appeared first on AvaAcademy.

In the markets, good trading habits can help you achieve several positive elements such as:

• Sound risk management strategies
• Good trading psychology
• More profits
• Avoiding common trading mistakes

Once adopted, habits happen almost by default and become second nature. It is, therefore, important to learn from the habits of successful traders so as to always have a structure that will guide you to success in the fast and dynamic global financial markets.

Here are 5 habits of online traders who have found success in the markets:

1. Always Learning

Successful traders are always feeding their hunger for more knowledge. Whether it is news about the markets, exploring new strategies, or any other activity that will enhance their overall trading. The markets are diverse, dynamic and always evolving, so there is always something to learn, relearn, or master.

The advantages of developing a habit for continuous learning and education are numerous, but here are some of the key ones:

• The ability to quickly identify opportunities and risks.
• Flexibility to adapt to changing market conditions.
• Maintain a far better trading state of mind as informed decisions can be made, therefore avoiding guessing or gut feelings.
• Helps avoid uncertainty, doubt, and fear.
• Confidence building which helps to maintain consistent success in the markets.
• Traders continuously improve their skills, and thus sustain their edge in the markets.

Some of the ways successful traders keep learning include:

• Reading expert market reviews, insights, and commentaries.
• Practicing actively on demo accounts (testing out new strategies, assets, markets, etc).
• Reading trading news and following economic calendar events closely.
• eBooks, and other educational materials. When you join AvaTrade, you will gain access to the AvaAcademy which is packed with learning resources.
• Following or connecting with top professional traders on social media, forums, newsletters, etc
• Trying out new trading technologies and tools.

In summary, it is vital to be constantly learning and growing if you want to be a successful trader. Be sure to allocate time daily to learn something new, and if you stick with it, it will simply become a habit that will pay off. In the words of Benjamin Franklin, “An investment in knowledge always pays the best interest.”

2. Trade with a Plan

Successful traders treat their trading like a real business. They have a meticulous plan that guides their trading activity in the markets. Having a plan ensures that they can maintain objectivity in the markets at all times.

A trading plan helps traders stay focused despite all the chaos that the markets are capable of throwing at them. There is no room for subjectivity or to allow negative emotions to guide any kind of trading decision-making. Trading without a proper plan is simply gambling.

A trading plan will include aspects such as:

• Setting goals and objectives
• How opportunities will be found
• Trading strategies and techniques
• Testing with demo accounts
• Timeframes
• Lot/position size considerations
• The required conditions for buying and selling (Entry / Exit rules)
• Risk management strategies
• Determining a risk vs. reward ratio
• How market positions will be managed
• Developing and maintaining a trading journal
• Any other relevant rules and more

Some of the benefits of having a trading plan include:

• Building trading discipline
• Avoiding emotional trading mistakes
• Simplifying and streamlining trading activities
• Better risk management
• Remaining focused and avoiding FOMO
• Identifying improvement areas

3. Manage Risks Effectively

There are always risks present in the markets, and successful traders aim to keep them at a minimum. This habit of managing risks effectively not only helps successful traders to achieve longevity in the markets but enhances their chances of earning profits.

Successful traders understand that trading is a game of probability with the aim being to achieve more consistent wins than losses. However, losses are inevitable sometimes but with effective risk management, the size and number of losing positions can be reduced.

A risk management plan ensures a trader that when losses come, they do not have a devastating impact on their trading capital. AvaTrade provides a number of solutions to help traders manage their risks and potential losses, including AvaProtect and negative balance protection.

Some of the ways successful traders manage risk include:

• Using conditional orders such as stop loss and take profit.
• Defining a maximum amount to be risked on a single trade, session, or time period.
• Only placing trades that have a favourable risk/reward proposition.
• Cutting losses early.
• Reducing risk exposure using strategies such as diversification and hedging.
• Keeping track of news or events that may impact their open trades.
• Never use excessive leverage.

4. Keep a Trading Journal

Keeping a trading journal is one of the most common and effective habits of successful traders. They record their entire trading activity (from before opening the trade to after closing it).

Your journal can be as simple as a notebook that you write in, or an Excel workbook, plus there are plenty of online options and mobile apps too.

Some of the things logged into a trading journal include:

• Analysis type used to identify the trading opportunity.
• The level of conviction of the trading signal.
• Trade details (asset, size, capital allocated, type of trade, leverage, fees, etc).
• Trade result (Win/loss amount, ROI, etc).
• Emotions experienced before, during, and after the trade.
• Lessons learned.

The more detailed a journal is, the more insights it will provide about your trading activity. Journals help in building discipline, and they also bring accountability in trading. You are less likely to make simple errors if you are recording your trading decisions.

Journals also help achieve trading consistency and reviewing them can boost your trading performance by highlighting areas of strength and weakness in your trading efforts.

5. Monitor The Markets More Than They Trade

Successful traders are very patient in the markets. They are like military snipers who apply their patience and mastery to achieve high success rates with their targets. Less is more in the markets, and this habit helps successful traders to achieve a high level of control over their trading activity.

Online traders spend the bulk of their time learning and researching about the market, and not actually placing trades. This can be likened to an elite athlete, who spends most of their time in training so that they are well prepared when it comes time to compete.

Some of the ways successful traders exercise patience in the markets include:

• Trade on higher chart timeframes.
• Open a trade only when all set criteria have been met.
• Trading only a few assets at a time.
• Not opening new trades after achieving certain set targets.
• Avoiding making trades because of FOMO

Timing when to enter or exit a position is vital to minimize risks and maximize returns, which is why sometimes the best way to avoid risk is simply not to trade and to wait for the right conditions.

Here are some ways to ensure you stay up to date with the markets:

• Allocating dedicated time every day for reading the latest news
• Setting alerts when certain market conditions occur
• Following reputable traders on social media
• Subscribing to newsletters
• Checking the economic calendar daily and following up on these daily events.

How to Adopt Good Trading Habits

Good trading habits will guide you to the path of consistent profitability in the markets. It is therefore important for traders to learn to develop and maintain good trading habits. It may take a while for these habits to become second nature to you, but the rewards will be well worth it.

Here are some tips to help you build and maintain good trading habits:

• Set clear, specific goals – Avoid settings abstract goals like “I want to make a profit.” Instead, be specific and detailed, such as “I will open only one trade per day.”
• Break bad habits systematically – If you are looking to adopt good trading habits, chances are that you currently have bad trading habits too. When breaking bad habits, make sure you do it systematically. For instance, if you wish to quit trading a particular asset, you may start by removing it from your watch list or charts.
• Commit to consistency – Habits take time to form, and you must commit to repeating them regularly even when it feels daunting to do so. You can start with small, fewer habits in the short term, and gradually scale into bigger, multiple habits that will have a huge impact on your trading performance.
• Have a plan when you fail – Building good trading habits takes time, and you must have the humility to accept that you may fail to maintain consistency at times. You should be able to expect this and be resilient enough to learn from it and bounce back better.

In the markets, your trading habits will reflect your overall trading performance. To learn more and to start building good trading habits to become a high-performance trader, the AvaAcademy is packed with trading courses.

The post 5 Habits of Successful Online Traders appeared first on AvaAcademy.

The financial markets can be very lucrative and technology has made them easily accessible to practically anyone. But if you want to have a chance at success with online trading, it is important to understand and avoid the common mistakes made by many traders.

We are going to explore some of the trading mistakes you should avoid when you trade by covering some vital elements of online trading including:

• Trading education
• Trading plan
• Trading emotions
• Overtrading
• Revenge trading
• Overleveraging
• FOMO
• Trading journal
• Profit targets
• Stop loss orders

Let’s get started.

1. Lack of Proper Trading Education

“Risk comes from not knowing what you are doing.” – Warren Buffet

One of the biggest trading mistakes to avoid, which is made by many traders, is starting your trading journey without proper trading education. You may even hope to hone your knowledge and skills in the market as time goes by. This is an innocent mistake to make because learning through trial and error can work in some places. But in the financial markets, it is a recipe for disaster.

The financial markets are diverse, complex, and dynamic, and as the saying goes: ‘markets can stay irrational longer than you can stay solvent.’ Ignorance is heavily punished in the markets, and not many traders can afford to keep making uneducated trading decisions. It is, therefore, very prudent that you have a solid grasp of important aspects such as market structure, trading strategies, risk management, and trading psychology.

Thankfully, plenty of educational materials and courses are available to the willing learner, as well as free and unlimited demo accounts where you can test your skills in the live market without risking any real money. A demo account is an essential learning tool that can be utilized by both new and experienced traders to build and advance their trading knowledge and skills and avoid common and costly trading errors.

2. Not Utilizing a Trading Plan

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” – Abraham Lincoln

If you are not planning, you are simply gambling and this can definitely be a big trading mistake. In the financial markets, profits and losses depend on entry and exit prices, and they are not worth the gamble. Many people simply trade to win, even when market conditions do not dictate so.

Trading is an endeavour where you need to understand your risks and rewards, as well as when to take your profits and losses. Having a plan that you consistently stick to will help you maintain objectivity throughout your entire trading activity. A trading plan will detail aspects such as your trading strategy, your risk parameters, your trading log, and more. It will help you build and maintain the discipline required to achieve success in the markets while avoiding mistakes in trading.

3. Trading with Emotions

“When you need to make a decision, don’t let your emotions vote.”- Joyce Meyer

When real money is on the line, traders can experience a wide range of emotions from excitement to desperation. For instance, it is easy to get excited about your financial fantasies when you are in a massive winning position; it is also easy to start fearing your financial situation when you are losing.

Emotions are natural but they are capable of distorting rationality when decision-making. They can trigger cognitive biases and impulsive actions in the market, which will ultimately have a negative impact on your trading activity. Financial markets can be very fast-moving and trigger a lot of emotions and this is often when traders make the worst trading mistakes.

The key for a trader is to not let emotions come in the way of logic and objectivity when trading the markets. Having and adhering to a rule-based system of identifying opportunities and assessing your risk/reward proposition can guard against being influenced by negative emotions in the markets.

4. Overtrading

“Too much of anything is the beginning of a mess.” – Dorothy Draper

Overtrading is simply opening too many positions in the market. Traders who overtrade want to capture as much profit off the markets as possible. This is a common trading error among new and experienced traders that can impact your trading performance negatively.

To start with, overtrading is a costly activity because of the trading costs associated with each position. Overtrading also divides your attention, making it very difficult to effectively manage your trade positions. Overtrading also means that you are likely performing low-quality research and analysis before taking a position in the markets.

Trading is a game of patience, and you can achieve better results by trading quality trade setups over the long run. Not every opportunity is worth trading, only the best ones. You can avoid overtrading by having a trading plan and taking some time off from the markets.

5. Revenge Trading

“While seeking revenge, dig two graves – one for yourself.” – Douglas Horton

Revenge trading happens when a trader opens positions in the market attempting to make profits after suffering a significant loss. This is similar to a gambler that chases their losses in the hopes of quick financial recovery.

Some of the ways people revenge trade include letting losing trades run, closing a position and taking the opposite trade, and making too many low-quality trades. Revenge trading has many dangers. It can make you disregard proper analysis, weaken your discipline, and also trigger a series of negative emotions that will further have a bad impact on your performance.

To guard against revenge trading and making further trading mistakes, it is important to know the warning signs. Use stop losses and assess yourself as well as your trading plan after suffering a big loss. It is important to also understand that there is no perfect strategy and losses are part of the game. You can also step back from the market for a short while until you are certain that you are ready to trade objectively.

6. Overleveraging

“Less is more.” – Ludwig Mies van der Rohe

Leverage is a powerful tool in online trading. It allows traders to control trade positions in the market that are much larger than their capital. Still, using excessive leverage is one of the biggest trading mistakes made by many new and experienced traders.

The obvious danger of overleveraging is incurring huge losses even on small price changes in the market. Overleveraging also locks capital in individual trades. Because of the potential of making huge profits or suffering big losses, overleveraging can also trigger negative emotions that will result in other bad decisions in the market.

The leverage tool should be used cautiously. Using low leverage is actually a survival tactic that will keep you in the markets longer. Overleveraging can be avoided by having a solid risk management plan.

7. FOMO

“Bulls make money, bears make money. Pigs get slaughtered.”- Anthony Gallea

In trading, FOMO refers to the fear of missing out on an opportunity in the market. A FOMO trader simply wants to do what other traders are doing, especially those that he/she perceives as more successful than himself/ herself.

In the era of social media, many traders can fall victim to FOMO. FOMO can be triggered by many things such as social media, volatility in the markets, news and rumours, as well as winning/losing streaks.

A FOMO trader has no trading plan, no patience, is indecisive and is driven by emotions such as fear and greed. A FOMO trader usually only cares about the possibility of making profits, completely disregarding the risks involved.

To avoid being a FOMO victim, it is important to continually improve your trading education. This will give you confidence in developing and utilizing your own trading plan, and not depend on the ‘wisdom’ of the crowd.

8. Not Keeping a Trading Journal

“Journaling leads people to life changes, leaps of faith, new insights, and meaningful decisions.” – Lynda Monk

Another major trading mistake committed by traders is not keeping a trading journal. A trading journal is a log of your entire trading activity. You should record everything from before opening a trade to after closing it. Some of the things to record include your analyses, market observations, your emotions, trade time and date, as well as performance. Reviewing your trading journal can help you identify your strengths and weaknesses and improve your trading psychology and performance.

A journal is only as good as what is recorded in it. So, make sure to log as much detail as possible. Trade journaling can seem tedious and time-consuming, but it will certainly improve your trading activity.

9. Allowing Profitable Trades to Turn into Losers

“Small wins are still won, and the journey is more important than overnight success.” – Katie Couric

This is a common trading mistake made even by experienced traders. It stems from being subjective about your trading activity and succumbing to emotions such as greed, confidence, and anxiety.

There is nothing sadder than watching profits dissolve in the markets, and you should plan better to protect your winnings. The use of profit targets and trailing stops can help you prevent profitable trades from turning into losses.

You can also book partial profits from an existing trade position to reduce your overall exposure in the markets. It sometimes makes sense to enjoy the small profits that the market gives you rather than becoming fixated on the big wins that happen infrequently.

10. Not Using Stop Loss Orders

“If you can’t take a small loss, sooner or later you will take the mother of all losses.” – Ed Seykota

Many traders know the importance of stop-loss orders, but they still go ahead and avoid using them. One of the common reasons traders do not use stop-loss orders is that they can be activated but then the market reverts to the predicted direction.

However, not using a stop-loss order can be very dangerous and could lead to loss of capital. Nonetheless, it is also very important to use stop-loss orders effectively. Avoid stops that are too tight or too wide and ensure that the orders are based on sound technical/fundamental analysis rather than mere emotion.

Final Word

Mistakes cannot be entirely eliminated from your trading activity. The important thing is to ensure that you are aware of them and learn from them. It is also important to stick to a trading plan and build trading discipline. In this way, even if trading mistakes happen, you can limit the damage they can cause to your trading performance.

To get started on the right foot, you can sign up for a free AvaTrade demo account or register with the AvaAcademy to enhance your trading knowledge so you can step into the trading arena with confidence.

The post Top 10 Trading Mistakes appeared first on AvaAcademy.

While learning from your mistakes, and successes is vital, it can be costly and time-consuming. The journey can be substantially shorter if you learn from the trading tips provided by experts. They have been there and done it, and you can glean from their knowledge and experience.

Let’s take a look at 10 effective online trading tips from experts:

Trading Tip #1: Choose a Good Broker

The first step of your journey can be the hardest. But if you get it right, the subsequent steps will only be easier. Your trading endeavors start with choosing a broker, and it is essential to get this right.

A good broker will ensure that you have the necessary resources and support you require to give you the best odds for successful trading. On the other hand, if you are dealing with a bad or unethical broker, the odds of trading success will be slim.

A good broker is like having a trusted business partner who always looks out for your best interests.

Here are some of the factors to consider when choosing a broker:

• Regulatory compliance – Regulation and compliance ensure that the broker is meeting their commitments set by financial authorities, such as how your funds are handled, fee transparency, data protection, and recourse steps. While trading with a regulated broker does not guarantee everything will be perfect, it does weed out many of the “bad players.”
• Overall reputation – In the world of finance, reputation is everything. A broker could be regulated and have an impressive offering but a reputation for bad service, in which case you don’t want to risk your time and money. Make sure to do sufficient due diligence on the broker you intend to trade with.
• Payment methods – Being able to deposit and withdraw easily with convenient payment methods is vital. Accessing your funds should be seamless, with reasonable fees and no hidden costs. Most importantly, you want to know that when it comes time to withdraw your profits, you will be able to do so.
• Trading platforms – Check to see what trading platforms the broker offers and whether will they meet your needs or preferences. Some brokers have their proprietary platforms, and while some might be good, as a beginner trader you will want to learn the ropes with industry-standard platforms like MT4/MT5.
• Tradable assets – The range of tradeable assets are another key consideration. Make sure the broker has a wide selection of assets for you to trade based on your focus. Having access to forex, stocks, commodities, indices, cryptocurrencies, and more, will ensure you can snap up opportunities in the market when they occur.
• Trading conditions – These cover aspects like trade execution, leverage, trading costs, and more. Make sure you know upfront exactly what the trading conditions are.
• Trading resources – From tools to signals, charting, analytics, economic calendars, calculators, and more, are just some of the resources that top brokers make available to their clients. No matter your skill level, you want to know that all the essential tools and resources are at your fingertips.
• Customer support – Having access to quality support can never be overstated. The best brokers invest substantially in their support and are highly responsive and professional.

Trading Tip #2: Understand the market you are trading

There are numerous trading markets online. With AvaTrade for instance, you can trade forex, stocks, indices, commodities, cryptocurrencies, and even options.

Some of the things to learn about any market include:

• Market structure
• Factors that move prices
• Unique characteristics
• Important terminology
• Risks and rewards

You will be able to make far better trading decisions if you understand your preferred market and in turn, it will allow you to:

• Develop a quality trading strategy
• Understand how to interpret market news
• Participate in online trading courses, forums or communities
• Adapt quickly and efficiently to different market conditions

The more you immerse yourself in getting to know a particular market, the more effective you will become at finding lucrative opportunities and identifying risks.

Trading Tip #3: Only place trades that have a favourable risk/reward ratio

Every trade opportunity has an element of risk. As a trader, you should ensure that the potential reward of any opportunity is greater than the risk involved.

For instance, if an opportunity has a risk/reward of 1:2, it means that for every unit of risk, there is the potential of two units of reward.

So, if you are risking $100 on a trade, there is potential for at least $200 in profits. This ratio is only favourable when the risk is lower than the potential rewards.

A favourable risk/reward ratio has benefits such as:

• It ensures that you only exploit the best opportunities in the market
• It protects you from the dangers of overtrading
• It guarantees longevity in the markets even if you have a bad streak (a single profitable trade could cover multiple losses)
• Helps in managing trading risks

Trading Tip #4: Always use a stop loss

A stop loss is a type of order that automatically closes your trade position at a specified price point when the market moves against your prediction.

A stop loss is a powerful risk management tool and can help prevent big losses in the market.

Reasons to use a stop loss on every trade:

• To minimize losses
• To improve your risk management
• To maintain objectivity in your trading

Despite their level of skill and experience, experts know that prices are capable of making sudden fluctuations and that losses at times are part of trading. Using stop losses can keep excessive losses under control.

Trading Tip #5: Have a trading plan

One of the universal expert trading tips is to treat trading like a business. This means that you need to have a defined business plan for your trading activity.

A trading plan is a comprehensive structure that guides your decision-making in the markets. A good trading plan will detail several trading elements such as:

• Your trading strategy
• Your trading goals
• Your risk management plan
• You trading psychology

Benefits of a trading plan:

• To simplify your decision-making
• To maintain discipline and consistency in the markets
• To identify your trading strengths and weaknesses

Trading Tip #6: Control your emotions

Where money is involved, there are bound to be emotions. When trading online, you cannot prevent emotions, but you would be wise to control them.

Emotions such as fear, greed, and overconfidence can negatively impact your trading activity.

Trading emotionally can expose you to unnecessary risks in the market and prevent you from sticking to your trading plan. True mastery of trading is being able to disconnect your emotions from your trading activity. Some of the ways expert traders control their emotions include:

• Sticking to their trading plan
• Journaling
• Taking breaks after big wins or big losses
• Seeking support from their peers

Trading Tip #7: Learn and test different trading strategies

Most traders typically learn and use one or two trading strategies. But it can pay to learn, test and use multiple trading strategies. The markets are very dynamic and different conditions require varying strategies to increase your capacity to take advantage of broad market opportunities.

There are many resources available for learning new strategies. But the best tool for testing, tweaking, and optimizing strategies is a demo account. No matter your skill level or experience, a demo account will allow you to practice and refine your approach, risk-free!

Some of the benefits of learning and testing different strategies include:

• Reducing your overall drawdown
• You can adapt to changing market conditions
• It helps with diversification

Trading Tip #8: Take what the market gives, not what you want

We are all in trading because we intend to make a profit, but experts advise that you should take what the market gives. The market does not care about your financial situation or your goals and ambitions.

Your personal needs should not dictate how you approach your trading activity. You should respect the market and only take what is available. For instance, you may need the market to move 100 pips so that you make the desired profit but the trend is sideways. In such a situation, targeting profits of about 30 pips may be the prudent decision rather than becoming fixated on unrealistic goals.

The post 10 Online Trading Tips from Expert Traders appeared first on AvaAcademy.

In the same manner, trading tools enhance your trading activity and can help you make better decisions, reduce risks, and achieve more consistent profitability in the markets.

Successful online traders mainly use trading tools to:

• Track and stay on top of market movements
• Identify potentially lucrative opportunities
• Reduce their trading risks in the market
• Maintain their trading edge

Trading tools can cut down analysis from hours to minutes, can help to avoid human errors, and expose opportunities that might otherwise be missed. The right trading tools will simply make you a better trader, and ultimately help you in achieving your trading goals.

Let’s look at 7 essential tools for successful online trading:

1. Trading Calculators

Trading is a numbers game, and that is why trading calculators are some of the best tools for online trading. There are different types of trading calculators that serve unique purposes. They include:

• Profit/Loss Calculator
• Margin Calculator
• Swap Calculator
• Pivot Point Calculator
• Fibonacci Calculator
• Currency Converter
• And many more…

Trading calculators help traders to manage risks, filter out the best assets to trade, identify good trading opportunities, as well as plan efficiently on how to take advantage of market opportunities.

For instance, a swap calculator can help in determining how much rollover interest you will pay or get paid when you decide to keep overnight positions in the market.

Essentially, calculators enable quick and accurate decision-making. You will have all the information you require to take advantage of the right opportunity at the right time.

2. Economic Calendar

The Economic Calendar is a trading tool used to track the scheduled release of news and events that may have an impact on the price of financial assets in the markets. News and events are the biggest sources of risks and opportunities, and therefore it is vital to keep track of relevant events.

Economic Calendars grade events according to the impact they are likely to have on the markets i.e., low, medium, and high. High-impact data and events are capable of triggering huge volatility in the markets.

An example of high-impact data is the monthly US NFP (United States Nonfarm Payrolls) report that tracks the changes in the number of employed people in the previous month but excludes the farming industry. The NFP report is an indicator of consumer spending which is the largest contributor to the economy.

Traders tend to watch for the expected result because traders will react to how the actual reading relates to the projected number that was expected. For instance, there may be a positive NFP reading but the US Dollar can turn lower because the actual reading falls short of the expectation of market participants.

A positive NFP reading is bullish for the US dollar, whereas a negative reading is bearish for the greenback.

Overall, trading with the Economic Calendar helps traders to:

• Keep track of news trading opportunities
• Avoid risks
• Identify volatility and potential price slippages

3. Currency Correlation Table

A currency correlation table shows how the prices of assets move in relation to other assets.

• When two currency pairs are positively correlated, their prices tend to move in the same direction.
• If a forex pair is negatively correlated, their prices tend to move in opposite directions.

Currency correlation tables have coefficients of between:

• -1 (strong negative correlation)
• +1 (strong positive correlation)

Using the currency correlation table helps traders in two key aspects:

• Unlock hidden trading opportunities
• Avoid high-risk exposure in the markets

EURUSD and GBPUSD correlation example:

The EURUSD and GBPUSD are positively correlated forex pairs, in other words, they both tend to rise and fall at the same time.

This means that when there is a strong positive correlation present in the market, you could consider opening 2 long positions and potentially earn more profits.

On the other hand, if both pairs are declining, you may want to take 2 short positions and capture more profits.

With this in mind, you would not want to take a long position on one pair and a short position on the other as these will tend to cancel each other’s potential.

4. Time Zone Converter

The financial markets around the world are open at different times. The time zone converter allows traders to keep track of which session is open, and thus which assets are ideal for trading.

Different sessions have different levels of volatility and liquidity, which impacts aspects such as trading spreads. There are also overlapping sessions, that provide unique trading opportunities for some assets.

The time zone converter is especially effective to use with the Economic Calendar tool. For instance, you can be on the lookout for Japanese data when you are trading USDJPY during the Asian trading session.

5. Trade Research Tool

Every trader has a trading system, but it helps to incorporate other trade research tools to gauge what other traders are looking at in the markets. Trading online is about identifying opportunities and deciding how to act upon them.

Idea generation tools can help in building conviction on a trade signal provided by your strategy or avoiding an otherwise risky trade idea altogether.

For instance, AvaTrade’s Trading Central is a potent tool that provides comprehensive technical insights on any tradable asset. Using the tool, traders can quickly view important technical points, trading volume, and even prevailing market sentiment for an asset.

Trade research tools can help traders identify new opportunities in the markets as well as minimize risk exposure. They can also empower traders to trade with confidence by enabling more informed trading decisions.

6. Risk Management Tools

Risk management is a vital component of trading online. On most trading platforms, the standard risk management tool is the stop-loss order. But there are many more potent tools that can give you even more control over your trading risks.

For instance, the AvaTrade AvaProtect feature allows traders to practically insure their losses against adverse price movements in the market. You stand to get reimbursements of up to $1 million on trades that are protected by this feature.

A good example of when to utilize this feature is during the release of high-impact data that can trigger huge price changes in the market.

Visit the AvaAcademy to learn more about AvaProtect and other risk management tools available to you when trading with AvaTrade.

7. Trading Journal

Trading journals help traders to record their entire trading activity for purposes of accountability and review. This powerful tool helps traders to maintain objectivity in the markets as well as consistent trading discipline.

Some of the details to record in a trading journal include:

• Pre-trade preparations
• Trade analysis method
• Planned strategy
• Entry, stop loss, and take profit levels
• Emotions before, during, and after the trade
• Trade results and lessons learned

A detailed trade journal will provide you with valuable insights into your trading activity. You can then proactively purpose to build on your strengths and improve on your weaknesses.

Many traders neglect to maintain a trading journal, which often leads to making the same mistakes repeatedly, or missing opportunities. It is important to use this tool consistently because a journal is only as effective as what is recorded in it.

Final Word

Using the right tools for a task can mean the difference between success and failure. Trading tools allow us to make better decisions as well as to avoid trading errors and mistakes. By using the right tool for the right job, you can boost your trading performance immensely.

Sign up with AvaTrade and access the best trading tools for online trading. Open a real or demo account!

Want to learn more about trading tools? The AvaAcademy has loads of resources to help you grow and become the best trader you can be.

The post 7 Essential Tools for Successful Online Trading appeared first on AvaAcademy.

A good trading strategy will help you identify quality, high-probability opportunities that have attractive risk/reward propositions.

It is important to note that a good strategy is not a perfect one, as there is no such thing. It is simply one that will generate more profits than losses consistently. For any trader that wishes to find success in the markets, here are 5 effective trading strategies for different market situations:

1. Trend Following Strategy

A trend in the market refers to the overall direction of prices. If prices are making higher highs and higher lows, it is deemed to be in an uptrend; and when it is making lower highs and lower lows, it is deemed to be in a downtrend.

A trend-following strategy seeks to trade with the general flow of the market. After all, there is the mantra ‘The trend is your friend.’

In essence, you want to swim in the direction of the tide, which is essentially the path of least resistance.

One of the best trend-following strategies is trading with moving averages.

Trend Trading with Moving Averages

Moving averages are one of the most potent technical analysis tools. They have stood the test of time because of their simplicity and versatility. Computed as average prices of an asset over time, moving averages can help traders identify a prevailing trend and the momentum, as well as confirm when the trend reverses.

Trend direction will simply be identified by the direction of the moving average. If a moving average is rising, then it means that prices are in an uptrend. The strength of a trend is determined by the slope of the moving average. The steeper the slope, the stronger the trend, and vice versa.

When trend following with moving averages, traders use the indicator’s line as a dynamic line of support and resistance. They provide a good opportunity for traders to join a trend when it has retraced. For instance, in an uptrend, traders can wait to place a buy order when the price has retraced to the moving average line.

Traders can also use multiple moving averages to confirm when a trend reversal has occurred. Shorter period moving averages respond faster to price movements than longer period ones.

Traders watch for moving average crosses to confirm potential trend reversals. For instance, consider that you are using a 21-period MA and a 55-period MA. If prices are trending higher but the 21-period MA crosses the 55-period MA downwards, it may be a confirmation signal that a downtrend is now in place.

2. Range Trading Strategy

Markets do not trend all of the time. When they are not trending, they are contained within a range that has defined support and resistance zones. In fact, markets are range-bound most of the time, and it is vital to have a strategy to take advantage of opportunities in these situations.

The idea in a ranging market is to buy at support areas and sell at resistance areas. One of the best strategies for range-bound plays is using the Pivot Points indicator.

Pivot Points Trading

The standard Pivot Points indicator generates 7 horizontal lines that act as reference support and resistance areas. There is a middle reference line (PP), 3 support lines (S1, S2, and S3), as well as 3 resistance lines (R1, R2, and R3).

In a ranging market, the lines will provide optimal price reference areas where traders can place buy/sell orders, as well as stop loss and take profit orders.

For instance, if the price is contained between S1 and R1, traders can seek to place buy orders near/at S1, with take profit at R1.

The stop loss can be placed below S1 or S2. Similarly, sell orders will be placed near/at R1, with take profit at S1. The stop loss can be placed above R1 or R2.

3. Breakout Strategy

Markets are never contained in a range forever. They eventually ‘break out’ and can embark on new trends strongly. When existing support and resistance areas have been breached, it could be the start of a new trend or the continuation of a previous one.

The lucrative opportunity to ride a new trend from its very onset is why a breakout strategy is essential for any trader.  One of the most effective strategies for traders to anticipate, and trade breakouts, is the use of Bollinger Bands.

Bollinger Bands Breakout Strategy

Bollinger Bands is a volatility indicator that was designed to contain prices between its upper and lower bands. Traders watch out for the Bollinger Band Squeeze when timing breakouts.

A squeeze happens when the bands converge, thus ‘squeezing’ the price. It implies low volatility in the market.

Breakouts happen during periods of high volatility, and this will be denoted by the divergence of the upper and lower bands.

While the Bollinger Bands Squeeze does not provide breakout directional cues, a bullish breakout will occur when the upper band is breached, whereas a bearish breakout will happen when the lower band is breached.

There is always the risk of false breakouts, and traders can combine different indicators such as Volumes to confirm valid support/resistance breaches. The ideal point to place a stop loss is above or below the opposite breakout band. For instance, if there is a bearish breakout, you can place a stop loss above the upper band during the squeeze.

4. News Trading Strategy

This is an event-trading strategy that seeks to take advantage of the opportunities that arise when high-impact new releases trigger significant price changes in the market.

There is a fortune of news/data released every day around the world that can have an impact on the prices of relevant financial assets. No matter your trading strategy, incorporating a news trading strategy can help you avoid unnecessary risk exposure in the markets or take advantage of quick and lucrative opportunities.

News releases trigger some of the biggest price movements in the market in any trading session. It is therefore important to keep track of the release of scheduled events using the Economic Calendar tool. Not every piece is news or event is worth trading.

In the forex market, it is worth tracking high-impact data such as inflation numbers, interest rates, employment data, and central bank announcements.

When trading the news, you can choose to place your positions before, during, or after the event. Each has its advantages and disadvantages.

5. Price Action Trading

Price action trading is the art of reading price behaviour in the markets. At any given time, the price of an asset reflects the consensus of the market participants.

The most important indicators for a price action trader are price and time. This is why a chart is the most important tool for a price action trader (even the only one). Charts plot prices of assets over time and knowing how to read them is key for successful price action trading.

Candlestick charts are the most popular on most platforms today. Each candle contains price information such as high, low, open, and closing prices of an asset within a specified time period.

Knowing how to read single candles and even multiple candlestick patterns can help traders identify important price opportunities in the market. Some of the best single candlestick patterns include:

• Hammer
• Doji
• Hanging Man
• Spinning top
• And more…

Examples of multiple candlestick patterns include:

• Head and Shoulders
• Double Tops / Double Bottoms
• Bullish / Bearish engulfing patterns
• Evening Star
• Plus, many more…

Price action traders can also use other chart types to read price action such as:

• Line charts
• Heikin Ashi charts
• Renko charts.

Final Word

Having a well-thought-out trading strategy is vital in the world of online trading. However, a strategy is only of use if implemented diligently and currently.

The biggest danger to a trader is himself. You must master your trading psychology to gain the mental edge required to find and sustain consistent success in the markets. This means trading with discipline and commitment and never letting your subjective emotions interfere with objective decision-making in the markets.

Do you want to learn more about the trading strategies you need to achieve success in the markets? The AvaAcademy is packed with powerful information to help you become a better and more successful trader.

Open a demo/real account and start implementing your trading strategy today!

The post 5 Trading Strategies Every Trader Should Know appeared first on AvaAcademy.