Trading Strategy

Trading is one of the most exciting hobbies or professions you can imagine. If trading is a goal of yours, then the first step you'll need to take is finding a good and reliable broker to trade through – like eXcentral. Moreover, once you've registered you can fund your account and begin thinking about trading strategies. Perhaps you already have your own trading strategy, but if you are looking for some guidance, the following article will give you some ideas of where to get started with a solid trading strategy.

Placing first trade

The most convenient way to begin trading markets is by using contracts for difference, or CFDs. These financial derivatives allow you to speculate on the future price of a variety of assets in the most straightforward manner. To place your first CFD trade just follow these steps:

1. Pick your asset class
2. Go long (buy) or short (sell)
3. Decide how large a position will be
4. Set stops and limits
5. Monitor and close when you're ready (more on this later)

Building a strategy

When you start building a trading strategy, your first hurdle will be choosing the market you want to trade. Once you know that, you can begin building a strategy for trading. Note that the same strategy won't necessarily work in every market. Different markets have their own personalities and require their own trading strategies.

Choosing the proper market to trade will be your first hurdle. The next will be to find an appropriate trading strategy. It should complement your own personality and trading style, otherwise you'll always be fighting yourself.

Another thing you want to consider is your own personality. You shouldn't choose a strategy that goes against your basic personality and psychology. Therefore, if you are somewhat risk averse a scalping strategy might not be suitable for you, or if you thrive on fast-paced risk then a slower paced swing trading strategy might not be your best choice.

Planning trade exit

Everyone is always focused on planning how to get into a trade, but too few traders think about their exit strategy. And yet it is just as important as the entry, and perhaps even more so.

The first part of your exit strategy should include setting stop loss levels to avoid a loss that's larger than you are willing to accept. Stop loss levels are specific to the market you're trading and one good way to choose them is by using the average trading range of your market. A good rule of thumb is to multiply the average daily trading range by 2 to get a good stop loss level.

That can also help you to determine a profit level, because a good rule of thumb is to use 2x or 3x your risk to determine your reward. So, you basically double your stop loss level and you now have a take profit target as well. Some people like to scale out of a trade, adjusting their stop loss accordingly as price moves in their favour, but that's a more advanced strategy you might want to consider exploring later.

Reading the financial markets

Reading the financial markets is a skill you'll need for your entire trading career. You'll need to learn how to read the price action of the markets you trade by analysing chart patterns, but you should also be aware of external factors that move the markets you trade. These could be things like interest rates, geopolitical risks, economic growth, industry trends, and much more. Each market has its specific factors that are important to the movement of prices.

Managing risks

Managing risk is one of the most important parts of your trading strategy. There are a number of things you can do to manage or even lower your risk on a trade. The first of these is to be very careful using leverage. If you do choose to use leverage, you should begin by using very small amounts. And always be aware of your exposure and where your margin levels lie.

Another very useful way to manage risk is to always use stop losses on your trades. These can be extremely useful in limiting losses when they occur.

Finally, be sure to choose a reliable and trustworthy broker for your trading – a broker like eXcentral.