Are you ready to begin the new year with a new attitude about your trading? The good news is that there are plenty of interesting, educational ways to sharpen your techniques and build a more powerful arsenal of strategies. One of the basic building blocks for traders of all experience levels is research.
Consider devoting a few extra minutes each day to background study, and you’ll likely be surprised at the results. In addition to that approach, think about using a paper trading simulator for honing your skills. Most discover that this kind of practice develops their insight in the areas of order placement, setting stops, and making quick exits.
What else can you do to ramp up your general skill level? In addition to keeping detailed records and following an expert’s daily trading activity, it’s always worthwhile to experiment with one or more technical indicators. Here are four ways that everyday traders and investors gain experience and improve their decision-making abilities.
Do In-Depth Research
Research and study can be tedious, but when it’s your money on the line, the boredom factor tends to evaporate rather quickly. One way to begin is to choose three securities that you frequently buy and sell. Spend at least two hours studying each company’s management, recent corporate news, history, and annual financial statements. By digging into the raw data available in the public domain, any trader can make more informed decisions based on daily price action and company announcements. Never underestimate the value of good, old-fashioned research.
Use Paper Trading for Practice
Whether you’ve been trading for a month or a decade, it’s wise to practice skills related to order entry and exit. For many people, the best way to learn the mechanics of the process is paper trading. The term paper refers to the fact that you’re not dealing with real money, only fictitious accounts on paper. All the top brokerage platforms and software products have some version of simulated buying and selling, so be sure to test out various ones before deciding which one best suit your particular style. You can use a paper trading simulator that lets you practice as long as you like, all while using virtual currency instead of your capital.
Keep Meticulous Records
Like research, record keeping is a central part of every experienced trader’s toolbox and an important element protecting your family’s finances and investments. Fortunately, software and automated systems do most of the work, but you’ll still have to check on your platform’s record-keeping accuracy from time to time. What can you learn from detailed records? For starters, you’ll gain a clear understanding of how and why you make decisions. People are often shocked when they realize that many of their purchases are based on emotion instead of objective rules. In addition to that insight, records reveal subtle mistakes and habits that directly impact your profitability.
Experiment with Technical Indicators
Choose two or three technical indicators that you are unfamiliar with and use them for a few days on a simulator. Based on the results and on what seems to work best for you, select one and apply it to your daily securities analysis. Remember to go slowly and learn the nuances of any indicator you add to your skillset.
