The stock trading profession can change your life. Thousands of traders are leading their dream life by mastering the art of the stock trading business. Being new to this industry, you might be thinking that you will secure financial freedom by trading the stock market. After trading with real money for a few months, you will realize, trading the stock market is not an easy task. You might blow up your trading account at the initial stage.
Today, we are going to discuss five effective techniques by which you can protect your trading capital in the stock trading business. Follow the tips mentioned in this article and trade the market with strong confidence.
Use a low leverage account
As a new trader, you should always use a low leverage trading account. You might be thinking that using a high leverage trading account is the best way to become a millionaire. In reality, the use of a high leverage trading account increases the risk exposure to a great extent. Even experienced traders prefer to use the low leverage trading account as it limits their risk exposure to a great extent. You don’t have to worry about the leverage factor once you chose a good broker. However, if you trade with the average class broker, make sure you double-check the leverage factors.
Trade with the trend
Professional traders always trade with the major trend. They know very well that the reversal trading method is very risky and it can impose a great threat to their career. If you want to succeed in the retail trading industry, you must learn to stick to the major trend. Even if you buy stocks, make sure you stick to the trend. Taking the trades against the major trend is one of the common reason for which novice traders keeps on losing money in the retail trading industry.
Use trade filter tools
To ensure the safety of your trading capital, you should always use trade filter tools. The majority of novice traders mess things up by using too many indicators in the trading system. If you want to make a living out of trading, you must use a simple trading strategy. Never think that by using too many tools or indicators, you can avoid false trade signals. Some of the rookie traders often think that by using the trade filter tools they can avoid losing orders. No matter how hard you try, you can never avoid losing trades in the market. Consider the losing trades as a part of your business cost.
Trade with low risk
You should always trade the market with proper risk management. Without following the risk management plan, no one can succeed as a trader. Being new to this industry, you should keep the risk factor below 2% in every trade. At times, you might have the urge to trade with high risk but you must control your emotions. Taking an emotional decision in the investment industry is another key reason for which retail traders’ blow up their trading account. At the initial stage, you may use the demo account and learn the role of risk management in the trading profession. Once you become good at managing the risk profile, you may trade the market with real money.
Trade in the higher time frame
To ensure the safety of your trading capital, you should be trading the market in a higher time frame. The lower time frame trade signals are not that accurate and it often misleads the traders. Though you will get bored with the higher time frame trading method, it is the most effective way to ensure the safety of your trading capital. Never become aggressive or follow the shortcut method in the trading profession. Stick to your trading strategy and try to find reliable trade signals in favor of the existing trend.