This is an important question. This is because most investors have had bad experiences with trading and there have been a lot of questions on whether it is profitable. It is important to note that there is a lot of money in trading and therefore this means that trading is profitable. The most important thing is to find out whether it is still profitable and why.
Knowing the risks involved
It is imperative that you should first seek to understand the risks involved so that you are able to make profits and avoid losses when trading. The biggest mistake that most people make is to pour their money into trading just because someone else did the same thing and they made profits without first seeking to understand how those profits came about in the first place.
Things you need to know
In order for you to first make a profit you need to understand how the market works and the factors that will be important for your success. Trading is profitable but you first have to research.
- Trading is high risk and you must have the capacity for high risk. This is very important to note. You must also have a stomach for losses.
- You must keep going even after making losses. It happens even to seasoned investors.
- Do your due diligence so that you are aware of what you are getting yourself into. This rule is just the same for any other business.
- Always trade with money that you can afford to lose. In order to mitigate risks by having other revenue streams. Do not depend only on one thing.
- Develop a trading strategy. It will enable you to stay focused as you trade. Remember to keep your strategy flexible so that you are able to change it according to market demands.
It will also help you to avoid emotional trading which has resulted in the downfall of many traders. Overtime you will find that this strategy will get better and better. When you are starting out trade on a virtual account to practice and to gain knowledge on how the market operates. When you do this over a long period of time you will be able to eventually make profits.
The best way to make trading profitable is to buy low and sell high. It’s easy to say, but hard to implement. The best thing about this is that you do not own these assets, and you are not marrying these stocks and don’t carry the emotions with it.
Keep in mind that it is not easy. You have to be patient. Most traders lose money while trading.
Some of the mechanisms that you can use to make trading profitable for you are:-
- Always use a stop-loss. This is used for every trading strategy. It determines the closing price of your trade and the trade will be closed at this level automatically. The best thing about it is that once you place a stop-loss you will not be worried about losing more money when your trades are going down. Keep in mind that you may not use it all the time because the market may behave in an unpredictable manner.
- Avoid being emotional. This is very crucial. Emotions mess up your thinking and you become prone to making mistakes. When some people start making losses when trading they start to make even more mistakes. Trading is not a life and death situation and you should always keep that in mind. It is an exercise that requires internal fortitude and discipline. You should not start getting worried once you start making losses. This is the point in which the trading strategy should kick in. Once you do this you will be on the right track to making profits through trading. Emotions get in the way and this is why it is imperative that you keep them at bay. Do not allow your emotions to get in the way of your trading. They can cloud your judgement and result in you making losses.
- Keep abreast of current market trends. This is a good way of making profits from trading. A lot of information that is out there will provide you with the data that you need to make informed trading choices. This is known as fundamental trading. When you are trading you should keep a keen eye on current events as they may impact your trading moves. They make things change in a heartbeat.
Profitability = Probability
In order to make trading profitable you should make sure that you have more profitable trades than losing ones. In simple terms you should minimize your mistakes so as to make profits.
The profitability of trading depends on your trading strategy and the amount of risk that you are willing to take. Remember that the size of your trades can be higher than the size of your deposits. This means that you can trade a lot more than you have. This will enable you to post high profits when trading. On the downside the same principle applies to losses. It all boils down to the amount of knowledge that you have acquired about trading, your trading strategy and your risk appetite. Be patient and in time you will start making profits.
One way of making trading profitable is to trade less. A lot of people make losses when trading a lot.
Another way of making profits is by concentrating on getting as much out of your winning trades as possible. In simple terms less work can often lead to better results.
In order to make profits when trading the average profit should be more than the average loss made. This means that any loss should be kept as small as possible and any profit should be made as big as possible.
You can use the Average Profitability per Trade to enable you to know how much profit you can make from a trade. This means that it should come up positive and that your overall profits are more than your overall losses.
You should also keep in mind that market timing plays a big role in determining how much profit you can make from trading. This means that you time the market in order to buy low and sell high so as to make profits.
Market timing is a key pillar for success.
This entails making the right moves at the right time.
You should also have a keen eye for stocks that are trading below their market value so that you can buy them at that point in order for you to sell them at higher prices. This strategy calls for a lot of patience and discipline.